First, from the
LA Times:
President Obama used his weekly video address to launch what will be a
weeklong push on the issue of college affordability, pressing lawmakers
to act to prevent a sharp increase in interest rates for student loans.
The
president noted that at a time of economic distress, a college degree
has never been more important. But "it's also never been more
expensive."
It has never been more expensive is true. But, I am not sure whether it has never been more important. Anyway, that debate aside,
the immediacy is in the fact that
In 2006, the rate on all types of Stafford loans was 6.8 percent. But
in 2007, a Democratic-controlled Congress passed a bill that cut the
rate on subsidized Stafford loans for undergrads in half over four
years.
The rate dropped to 6 percent in 2008-09, to 5.6 percent the next
year, then to 4.5 percent and to 3.4 percent for the 2011-12 school
year. Under that act, the rate jumps back to 6.8 percent starting July
1.
"It's not surprising the 3.4 percent rate expired in an election
year," says Mark Kantrowitz, publisher of Finaid.com. "Normally Congress
passes legislation with a five- or 10-year window. The four-year window
was timed perfectly for an election."
In other words, Democrats knew Republicans would have a hard time letting a rate increase take effect on the eve of an election.
When one can get 30-year mortgages for 4%,
letting the rate increase now, when jobs are harder to find and
schools are cutting other types of financial aid, would be a "triple
whammy" on students.An argument could be made that at a time when banks are paying almost
nothing on deposits and mortgages can be had for 4 percent, a rate of
6.8 percent is too high for all student borrowers.
With a bachelor’s degree, even $40,000 may be a manageable level of debt
over the long term. But for those who are unemployed – including 9.1
percent of the 20- to 24-year-old college graduate labor force and 20.4
percent of their peers with no college degree, according to
a recent report – even much smaller amounts may be unmanageable in the short term.
The worst one could do is to go to graduate school to get non-professional and non-terminal degrees--these will merely add to the debt. Yet, students continue to flock to
graduate school, especially in the humanities and the social sciences!
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