Congress seems on its way to approving legislation that would prevent, at least for one year, a doubling of interest rates on college loans taken out by students from low- and moderate-income families. And that's a good thing. Combined with projected tuition increases this fall, the interest-rate jump, as scheduled (from 3.4 percent to 6.8 percent), would drive college costs up by 20 percent for these borrowers.
But only in the crazy world of federal budgetary politics can protecting a 3.4 percent interest rate feel like a victory. After all, the Federal Reserve lends money to commercial banks at a discount rate that currently stands at 0.75 percent. That's right: 0.75 percent. In what universe does it make sense to set interest rates for loans to help low- and moderate-income Americans attend college at more than quadruple the rate we expect the banking industry to pay?
Certainly, college students and their families should be required to pay the full cost of administering these direct loans, and an additional cushion to guard against default is reasonable. But that does not justify charging 6.8 percent in interest. Heck, home mortgage rates aren't even that high, and there is a lot of profit made on home loans.
In the same way that the loan policies of banks are set to generate revenue from hard-working people who aspire to own their piece of the American Dream, the federal government's student loan interest rates are set to generate revenue from hard-working college students struggling to learn their way to a better future and earn their way into the middle class. Surely, there are other budget sources to which we could turn if we prioritized opening college access and curtailing crippling student debt.
Yes, a low discount rate helps drive our economy to greater prosperity. But so, too, does expanding college opportunity far beyond the fortunate few. Indeed, researchers project that our workforce will need millions more people to be college educated than we are producing. And it's hard to see how a trillion dollars in student loan debt is anything other than an unsustainable drag on America's economic future.
Of course, the federal government does not bear sole responsibility for making a college education affordable. State governments and the institutions themselves have critical roles to play in controlling college costs and expanding opportunity. But as we approach the 40th anniversary of the Federal Pell Grant Program -- which was conceived as a powerful lever for opening college doors to millions of low-income students but has, since 1980, lost more than half of its buying power at four-year colleges -- the federal government needs to dramatically up its game. That means our students and our economy need policies far bolder than maintaining a 3.4 interest rate on federal student loans.
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I want Congress to provide an exemption to the current tax code which would allow for donations to student debt to be considered charitable contributions, and therefore be deductible from income. I have already started a petition on Change.org titled "Modify Tax Law for Student Debt Relief" and it has been featured in an article by Bill Conrad of the Plano Star Courier.
I envision large corporations buying the idea that if they designate a portion of their annual charitable donations towards student debt, then they could free up that equivalent amount of cash for student debtors (consumers) and immediately impact the US economy. Many people may believe that student debtors don't deserve money for getting themselves into this debt, but the fact of the matter is that the US has a crisis on its hands, and rather than make unproductive judgements and pointing fingers, the ethics should be left up for the donor to decide. My idea does not place a burden on taxpayers and would be completely voluntary.
Please help me stir debate across the US about my idea by signing and passing my petition to everyone you know.
http://www.change.org/petitions/modify-tax-law-for-student-debt-relief
http://www.scntx.com/articles/2012/05/03/news_update/7279.txt
How many people will be crippled by the acts of the ‘new kid on the block’ student loan debt cradled within credit swap bundles? How it is that student loan collections and their profits have outpaced every other financial entity on the planet, including medical care? How can these unethical and immoral practices go without oversight, scrutiny, and accountability?
The shackles of indentured servitude can go and will go for decades; ‘free money’ which many colleges tout as your way to a better life. Really, a better life, becoming a slave-wager for the rest of your natural born life, really! Just understand that the so called ‘free money’ will hook you and strip away any thoughts you had about: car ownership, home ownership, a future child or children and their college ambitions, vacations; just because student loan collection agencies can get away with unscrupulous manipulation due to lack of regulation, ethical concerns, and an inability from our Congress and State Representatives and their failure to do something.
for more info: http://studentloandebacle.blogspot.com/
Birgeneau ($450,000 salary) likes to blame the politicians, since they stopped giving him every dollar expected. The Chancellor’s ‘charge more’ instate tuition skyrocketed fees by an average 14% per year from 2006 to 2011-12 academic year. If Birgeneau had allowed fees to rise at the same rate of inflation over the past 10 years they would still be in reach of most middle income students. Increasing funding is not Cal’s solution.
UCB is a public university created to maximize access to the widest number of instate students at a reasonable cost with a mission of diversity and equality of opportunity. Unfortunately Birgeneau’s ‘charge more’ instate tuition diminishes the equality and inclusion principles which underlie our state and country. Birgeneau’s and Provost George Breslauer’s ($306,000 salary) ‘charge more’ instate tuition denies middle income Californians the transformative value of university education.
Chancellor Birgeneau’s tenure is a sad unacceptable legacy.
Opinion to: UC Board of Regents marsha.kelman@ucop.edu and Calif. State Senators and Assembly members.
Fix that problem, and student loan rates won't seem so daunting.
It is really depressing and hopeless.
All I feel some days is despair, and wish I had never pursued a higher ed at all.
Why is the answer for dealing with a debtor in America today to pile more debt on top of that debt until the debt becomes impossible to pay off?
I am soooo sorry I didn't go straight to work after high school.
www.esqpainting.blogspot.com
What part of this did I miss?
While I think that Guaranteed Student Loan largess is fueling rising college costs, I certainly wouldn't want to see loans eliminated. Well structured loans are a win-win: The student gets a shot at a good education, and society gets teachers, doctors, nurses, engineers...And the students pick-up most of the cost.
That said, our current loan system is poorly structured, fuels skyrocketing costs, and makes a lot of bankers quite wealthy at the student's expense.
Might I ask what sort of education cost $100,000? And how you got roped into a 9% interest rate?
My daughters recently graduated college (One went to a state school, and the other went to a pricey private school--University of Southern California). Neither has anything like $100,000 in loan debt.
Is that a given? Presumably we're in this business because we view it as a positive for our society. If we as a larger economy get a benefit from people taking these loans and getting an education why should all the cost be shouldered by the recipients?
I'm merely questioning this "certainly" assertion that the borrowers should also pick up the costs of administering the loans, or even all the real interest costs. There's no line-item on your tax return to cover the costs of processing it; we accept that it's rolled up into the total costs of government. Why not apply the same principle to these loans?
I don't have a personal dog in this fight; I went to a state school years ago, when tuition was more affordable, and worked my way though. But I'm not under the illusion that everyone has the same advantages I did and I have a personal interest in a robust US economy.
Perhaps part of the way there is to insure liquidity for people who wish to go to college. I'm open to the idea that it's not the best use of our money but I don't think it's self-evident that borrowers must shoulder every associated cent. We write research grants, bail out pension funds, lease government land for exploration at below-market rates. Why shouldn't college loans be open to similar financial greasing?
Is that $85,000 per student per year, or for a 4 year degree?