No Matter Who Wins the Student Loan Fight, Students Will Lose
Congress is squabbling over student loan interest rates, but we really need to reform the system altogether.
In the past few days, both parties have turned the fate of college kids into a political football. With the 3.4 percent interest rate on student loans set to double July 1 if Congress doesn't temporarily extend relief, President Obama and his adversaries have taken to arguing about how we might pay for the difference. House Republicans have suggested scooping out billions from the fund for the Affordable Care Act's preventive care measures; Obama swears he'll veto such a plan. If this is anything like the push-and-pull battles Congress has waged during the past three years, there's a chance those students will be even more crushed by debt than they already are.
But even if Congress does come to their senses and pass the relief extension without chipping away at other essential funds, keeping interest rates low will be a short-sighted solution to a huge, long-term problem. If Obama or the Republicans really cared about students' financial and educational futures, they'd support the Student Loan Forgiveness Act. Since 1998, virtually all federally subsidized student loans have been ineligible for settlement through bankruptcy. And in the past few years, private, unsubsidized student loans have begun to move the same direction. This can result in skyrocketing interest rates and penalties, garnished wages, seized tax refunds, and loss of Social Security benefits—a crippling fate for someone at the advent of their career. The Student Loan Forgiveness Act would allow anyone with huge student loan burdens compared to their income to pursue bankruptcy. Nearly 700,000 people have signed a MoveOn.org petition, started by lawyer and student-loan debtor Robert Applebaum, supporting the proposed legislation—yet Congress isn't even considering the idea.
Or if the government truly cared, it'd do away with—or at least dramatically reform—the student loan premise itself. The average student now graduates with $25,000 in debt; the total amount of $1 trillion is more than the nation's credit-card debt. If both sides would drop the counterproductive deficit hawkishness and pour money into public universities and promising students, maintaining low interest rates on student loans would be a moot point. Back in the '60s (and in the '40s, with the G.I. Bill), the United States invested enormous amounts of money in higher education, which resulted in millions of people being able to afford college. Back then, student loan debt was unheard of. City and state colleges were free or had nominal fees. Private colleges were always expensive, but at least there were some realistic, merit- and need-based options for diligent working-class students.
Next to these solutions, the present squabble seems downright absurd. We need to start seriously considering proposals like the one by University of California students, who proposed a detailed plan to make UCs affordable again, instead of nitpicking over a few percentage points on interest rates. Unfortunately, as the election approaches, Congress seems less willing than ever to set aside their differences to actually help people they're using as pawns.