Interest rates on student loans will double to 6.8 percent on July 1 unless Congress acts. But it seems increasingly likely that the Congress will take off for the Fourth of July recess without addressing the problem. The major sticking point: Republicans in the House and Senate insist on gouging the kids to help reduce the deficit.
House Republicans passed a bill that would tie the student loan interest rate to that of the 10-year Treasury note plus a surcharge of 2.5 percent, with rates changing each year. That would leave families struggling to piece together financing for college exposed to unpredictable changes in bond prices.
The Republican surcharge is designed purposefully to make money off of students -- $3.7 billion over 10 years, according to the CBO -- that would be used to help reduce the deficit. Some Senate Democrats have now joined in a compromise that would lower the surcharge, but still make money off student loans for deficit reduction (an estimate billion dollars over 10 years)
Think about that. Republicans and Democrats have trumpeted the need for corporate tax reform -- shutting down tax dodges and lowering rates -- that would demand corporations contribute exactly $0.00, nada, nothing to deficit reduction. The reforms would be "revenue neutral." Companies are stashing away nearly $2 trillion overseas to avoid paying taxes -- and the "reform" will ask them to pay nothing more to help government meet its bills.
But students doing what we want them to do -- struggling to find a way to afford a college education -- get stuck with helping to reduce the deficit.
Shared sacrifice is for suckers.
The fact is we want students to get the advanced education and training that they earn. We don't want good students getting priced out of college. There is virtually universal consensus that our social and economic prospects will depend on the next generation getting more and better education. And college education or advanced training is necessary, if no longer sufficient, to reach the middle class -- and to have any hope at the increasingly endangered American dream.
So why gouge the kids taking on debt to stay in school and not the corporations secreting profits abroad to avoid taxes? Clearly corporate lobbies and contributions speak louder in the corridors of power than students and their families.
Senator Elizabeth Warren has introduced legislation to give students that same interest rate that the banks enjoy from the Federal Reserve (0.75 percent) for a year, while Congress a broader program to make college affordable. We subsidize bankers whose excesses blew up the economy, why not subsidize kids struggling to pay for the education we say they need? Conservatives dismiss the Warren proposal out of hand.
Perhaps the most sensible thing Congress can do now -- preferably before it takes off on vacation - is to extend the current rates -- 3.4 percent -- for two years while a serious solution is worked out. Senators Harken, Reid and Murray have introduced a bill for that purpose. But to date, Republicans in the House and Senate are holding out to gouge the kids. And some Senate Democrats are folding to that demand.
These are the policy choices -- in this case making college less affordable, letting corporations pay ever less in taxes -- that undermine the broad middle class and contribute to the extreme inequality that increasingly saps our economy and corrupts our democracy. For more information on this go to www.ourfuture.org. (Full disclosure: that's the web site of the Campaign for America's Future, which I help to direct.)