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Student-loan compromise

10 months 27 days 14 hours ago |1025 Views | | | Email | Print

Students taking out government loans to pay for college in the next few years caught a break, thanks to action by Congress last week. Down the road, however, student loans may not be such a bargain and the high cost of gaining a college education will continue as an obstacle for many.


The interest rate charged on college student loans had become a perennial debate in Congress, as it was this year and last. That was evident as the rate on new subsidized Stafford student loans doubled to 6.8 percent July 1 because Congress could not agree on a way to keep them at 3.4 percent. So without action by Congress this year, the rate would stay at 6.8 percent, a level that most lawmakers described as unacceptable, particularly with the average student loan debt climbing to more than $26,000.


In a rare show of bipartisanship, first the U.S. Senate and then the House passed legislation that will lower the loan rate to below 6.8 percent, at least for loans taken out in the next few years. Undergraduate students this fall will be able to borrow at a 3.9 percent interest rate for subsidized and unsubsidized loans. Graduate students would have access to loans at 5.4 percent, and parents would borrow at 6.4 percent. Backers of the legislation said the new plan would mean lower rates for 11 million borrowers this year with an average saving in interest charges of $1,500 for undergraduate students.


However, the bill, which President Obama said he will sign, ties the student loan rates to the rates on 10-year Treasury notes from here on out. …


From the standpoint of the government’s pocketbook, the move makes sense, allowing the government to charge more for the loans when it has to pay out more for its borrowing on Treasury notes.


But in the long-term, college students and their families are likely to pay more than they do now. That adds to the urgency of trying to find a better balance between government support of higher education and the costs that students and their families must bear for young people to gain the skills they need to be successful. At this point, the trend is generally not favoring the students.


— The Herald-Dispatch, Huntington

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