Students to pay more

Senators: Student loan interest rates to double
Associated Press
Jun 27, 2013

 

Student loan rates will double Monday — at least for a while — after a compromise to keep student loan interest rates low proved unwinnable before the July 1 deadline, senators said Thursday.

Sen. Tom Harkin, the chairman of the Senate education panel, said none of the proposals being circulating among lawmakers could win passage, and he urged lawmakers to extend the current rates for another year when they return from the July 4 recess. Harkin said his colleagues could retroactively restore the current rates after the holiday.

"Let's put this off for a year," Harkin, D-Iowa, told reporters.

Interest rates on new subsidized Stafford loans are set to go from 3.4 percent to 6.8 percent on Monday unless lawmakers take action. Congress' Joint Economic Committee estimates the increase will cost the average student $2,600.

"Neither party wants to see rates rise next week," said Sen. Richard Burr, R-N.C.

But a one-year rate extension isn't an acceptable option, either, he said.

"Last year we kicked the can down the road and passed a one-year extension for only a small group of students. ... Why would we make the same mistake again and just kick the can down the road another year?" said Burr, who was among a group of senators who worked on a competing proposal with Sen. Joe Manchin, D-W.Va.

The Manchin-led proposal would link interest rates to the financial markets. It borrowed heavily from a version House Republicans passed earlier and from principles included in President Barack Obama's budget proposal.

Critics called it a bait-and-switch move that would provide students lower interest rates at first before they climb upward as the economy improves.

"Students across this country would rather have no deal than a bad deal," said Sen. Jack Reed, D-R.I. "We're at the point where we have to do our best to extend the 3.4 percent interest rate while we work on a good deal, not just any deal."

Republicans blamed Democrats and said they would be responsible for the expected rate hike.

"As a result of their obstruction, the Democrat-led Senate will leave town and allow interest rates on some new student loans to increase on Monday," said Senate Republican Leader Mitch McConnell. "Senate Democrats continue to block reform and insist on kicking the can down the road."

Republicans also noted the Manchin-led proposal had many similarities with Obama's, including a link between 10-year Treasury notes and student rates.

"This agreement is very much like the proposal in the president's budget, it is very much like the proposal passed by the Republican House of Representatives and it will save billions of dollars in interest for all 11 million students taking out loans this year by dropping rates on all student loans," said Tennessee Sen. Lamar Alexander, the top Republican on the Senate Health, Education, Labor and Pensions Committee.

Alexander, a former education secretary, called Harkin's proposal "a short-term, political fix."

"That's no fix at all when we have a plan to help all students that we can pass quickly," he added.

Nothing was happening — quickly or not — before July 1, meaning students who take loans would face higher rates. Senators were heading out of town without a deal, and Harkin said his colleagues would consider a retroactive fix on July 10.

"I think we are nowhere between now and July 1," said Rep. George Miller of California, the top Democrat on the House Education and the Workforce Committee. "It sounds to me like the Senate is going to leave town without dealing with this."

But Democrats promised to turn back to them when they get back to Washington, first with a short-term fix and then a longer-range measure.

The law that governs college and universities expires this fall and lawmakers planned to rewrite it starting in September. Democrats said they prefer to include a comprehensive student loan measure in it, rather than as a stand-alone bill.

"We need a one-year patch to keep interest rates from doubling on student loans," said Sen. Elizabeth Warren, D-Mass. "That buys us the time."

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Comments

The Hero Zone's picture
The Hero Zone

Ugh.

That's not some fancy internet slang. That's a statement of disgust and dissatisfaction.

Blues

M*****F****R! G******T!

SamAdams

Once again, the feds get involved where they shouldn't have had their dirty little fingers in the first place; and once again, the feds screw it up, and it's the "little" people who pay.

Student loans are a great idea in the most general of terms. But because the government was all about the hand-outs, it forgot that money has to come from somewhere. The student loan program, both through debtor default and artificially low rates, has been a money-loser for years. We're just finally seeing the chickens come home to roost.

Me? Rather than loans, I'd prefer to see a work-for-tuition-and-board program instituted for those students who can't afford to pay all (or even any) of their tuition. If universities and local companies organized the programs, they might actually work, too! Lots of people go to school while they hold down a job. SOME insane (insanely dedicated and ambitious, anyway!) people do both full time! And frankly, I'd rather have very little personal time for several years than plenty of time and a mountain of debt...

The reasons I didn't go to college? Money and money. And yes, I knew loans were available, but I didn't want to start my life behind the eight ball, thank you. I've done all right anyway, but that isn't the point.

Once again, the best solution to the problem: Privatize the loans, and set up some programs to trade work for schooling. That way, you can pay for it if you can; get loans if you want to; or you can work your butt off for a few years if you're motivated enough. (I'm guessing, by the way, that the ones who will get the MOST out of their schooling will be those who appreciated it enough to work for it. Just a thought...)

The Hero Zone's picture
The Hero Zone

Thank you, I humbly wish my "ugh" to be representative of this comment. I was too busy facepalming and/or squeezing my temples to be able to put it all out there like this.

Nemesis

Government financial aid caused all these problems. Subsidies only accelerate inflation. Under the current system, if a school hikes its tuition, government programs make up the difference, and they don't lose any customers (students.) Like all government handouts, this creates perverse incentives, such as the current tuition "arms race" where schools actually engage in REVERSE price competition - they actually race to be the most expensive. This has created an education bubble.
30 years ago, you could earn full time tuition to a competitive private university working 25-30 hours a week in a better retail job, the typical starting salary for engineering grads was 3-4 years tuition, and for liberal arts majors, it was at least 2 years tuition. That's a return on investment of 15-24 months - not bad. Now, typical starting salaries for college grads are less than one year's tuition (and it's obvious that means only someone with a masters degree can get a job that would cover tuition as you go.) This is because the nannystate decreed that everyone should go to college, and we should all pay for it, whether they had aptitude and an intelligent plan, or not. Since the government doesn't have to get voluntary buy in from investors, there's no accountability, and hence no reason to care if the recipients of this assistance will ever graduate. The result - schools are flooded with semi-literate hordes who don't have a clue why they're enrolled, or any idea how to choose a meaningful course of study, and the schools respond by offering a smorgasbord of worthless degrees in made-up or politically generated majors, tied to courses of study that are largely edu-tainment pablum, and lo and behold, the market is flooded with confused people with sheepskins, which the law of supply and demand, together with the aggregate drop in quality, has rendered worthless.

The Big Dog's back

How about Corporations paying for their future employees education.

SamAdams

Big Dog, you have no idea how much it pains me to say this...but you're right! That would be ANOTHER good option that wouldn't put students in debt for half their lives. Students would, of course, have to agree to work for said corporation for X number of years (or buy out their contract), but it would cover education, get companies employees they already know are willing to work toward their goals, and perhaps even get more people to college who couldn't otherwise manage it.

Yes, add this one to my list. :-)

The Big Dog's back

Cool. :)

grandmasgirl

Some company's do have this program. It used to be more popular back in the 70's and 80's.

Blues

And I'm too busy doing a Jon Stewart imitation of cussing and ripping up paper...

Here's the thing. "THEY" have theirs and F**K the rest.

Don S

Big Dog;;;; Be real, Corporations don't want to pay it's employees healthcare !!! What makes you think they would spring for their employees education ??

Nemesis

They currently do. Most major corporations and many minor ones have tuition reimbursement programs for their employees. Most of the nation's MBA's are paid for by the students' employers. That's why the business schools get shiny new everything from university administrations - they are cash cows.

UJagoff

You are better off to be on welfare or an illeagal than to be born here and have a working caring family that encourages you to succeed!

SamAdams

Sadly, you said it! Maybe a bunch of us ought to move to Mexico for a bit, then sneak back across the border illegally and cash in!

The Big Dog's back

So you would really like to live the life of an immigrant? I don't think so.

TrollingRageind...

And succeeding equals wasting years of your life to the scam known as college? Let's be honest here, college is a scam. It does NOT take 4 years to obtain the knowledge you obtain while "earning" a bachelor's degree. It would take the average person less than a year to obtain the same skills by teaching themselves, while costing very little compared to college. And anyways, if what you are after is money, don't get yourself any "higher" education.

AJ Oliver

Jeez Sam - you don't know even the basics about the student loan fiasco. In fact, "The U.S. government has made nearly $120 billion in profit from student borrowers and their families over the past five fiscal years." (HuffPo)
And further, the system WAS privatized earlier by the GOP. It was even worse then.
The gummint should NOT be making money off the backs of struggling young people.
Think about Quebec a few years ago. When the govt. tried something like this, there was a mass uprising of everyone, not just students. As long as we continue to have zero sense of solidarity, we're gonna keep getting screwed.

SamAdams

Student loans (like many mortgages) are only nominally privatized. Fannie Mae, Freddy Mac, Sallie Mae... they're gov't built, HIGHLY gov't controlled. It ain't the banks. It's the government by whatever name you choose to use.

The New World Czar

Sallie Mae is on the path of where Fannie Mae and Freddie Mac were a few years ago. Too diluted of a system of loaning out money to those who may not repay.

Of course the universities aren't going to refuse tuition money (whether borrowed or not) as it gives them the opportunity to expand staffs and facilities. What's arguable though is if these "expansions" result in a better end-product graduating...and actually paying back their student loans if John or Jane Doe can't find a job in their chosen field of study.

Government policy influencing a market...isn't this a form of Keynesian Economics?

The Big Dog's back

Actually that's Capitalism.

The New World Czar

Dog, your sarcasm has gotten better with age. Can you for the record define your meaning of "Capitalism"?

The Big Dog's back

Sure. Capitalism is a society where the bottom 90% work to support the top 10%.
http://www.worldpublicunion.org/...

The Hero Zone's picture
The Hero Zone

I suggest then that economics be mandatory to be taught in school and allow the option for private accounts for benefits such as Social Security and Medi-Xs. That then increases knowledge AND participation in the market which will benefit everyone.

whocares

Didn't Obama make a campaign promise to student voters that he would help them out with their loans?

AJ Oliver

No country in the world has EVER built an educational system without its being organized and paid for by the government. Read about the Land ordinance of 1785 and the Northwest Ord of 1787. They laid the foundation for the great system of education that came out of them. Now many conservatives (and some Dems too like Arnie Duncan) are dedicated to smashing what so many people worked so hard to build. It's just flat evil.
K through university education should be free, as it is in many countries.
Wake up people !!

The New World Czar

Food for thought- how are taxpayer-funded public (K-12) schools doing now?

Nemesis

The legislation you cite was for 1-8 education, and even that has turned out to be a joke in this country. The university system was not built by government, but rather, in its origins, by churches.

TrollingRageind...

Raise it even higher, teach them a REAL lesson. The students signed their name, they should know what they got themselves into.