If you’ve never had to foot the big bill of student loan debt, imagine for a moment that you did.
Imagine that you’re a fresh-faced, young professional having to do it in this day and age. The loans students must take out are bigger and bigger because the cost of college in the United States, according to a study done by Bloomberg, has increased an incredible 1,120 percent over the past 35 years — four times faster than the increase in the consumer price index. Once you complete that education, you are faced with a job market that is rehabbing at a snail’s pace. And according to a recent survey from Accenture, two in five recent college graduates say they are underemployed and overqualified for what jobs they do have.
These aren’t ideal conditions for making ends meet starting out in life. And in such a situation, the already heavy burden of student loan debt — tens of thousands of dollars for countless young Americans — weighs even heavier. The only extra straw it’d take to break the camel’s back is a painfully high interest rate on your loans.
Without action in Washington, we’re about a month from seeing such a thing happen.
On July 1, the interest rate on federally subsidized student loans is set to double to 6.8 percent from the current rate of 3.4 percent, when a temporary reduction expires. This is a result of politicians — you know, the same group that has such a good grasp on money issues that the country is $17 trillion in debt — putting themselves in charge of setting the rates several years ago.
Fact is, they shouldn’t be in charge. It only opens up student loan interest rates to be influenced by politics, and when they are, it can come at the expense of borrowers. These people, who worked hard and needed some financial help to get a college education, are the future of our workforce. We should be providing them long-term certainty with a fair interest rate structure driven by the market, not by political whims.
And to the relief of Americans who are asking for bipartisanship from their elected leaders, there’s support on both sides of the aisle for this idea.
The President’s Fiscal Year 2014 budget proposal includes a plan that, according to a statement from his office, “is deficit-neutral and offers affordable, market-based rates, particularly for those students and families who struggle most with the cost of college.” Seizing on the possibility for a bipartisan solution to this matter, House Republicans introduced and passed a similar measure soon after in May, the Smarter Solutions for Students Act.
This legislation would establish a predictable and permanent formula for determining student loan interest rates by tying them to market interest rates and setting a reasonable cap. Our bill actually would save both taxpayers and borrowers money — it’d slow the growth of federal spending by $3.7 billion over 10 years, and if it were to become law this summer, most student loan borrowers would have their interest rates fall by at least 2 percent.
Because the Smarter Solutions for Students Act so closely mirrors the President’s proposal, you’d think the legislation could be passed by the Senate and signed into law without many hiccups. But the Senate majority has dismissed the legislation already, and confusingly, the President waged a campaign-style crusade against it during an event this past week. It’s funny that the very politics our bill is trying to stamp out are being used against it.
What’s more, some of the legislation’s opponents simply are calling to extend the temporarily reduced 3.4 percent interest rate for a couple of years. The problem: we’ve already extended the rate once, and doing so again would cost taxpayers $8 billion and fail to present the apolitical solution that the House is seeking and the President has claimed to also seek.
The good news is that I believe a compromise is not far off, and I trust that he and House Republicans have approached this issue in good faith. Now it’s time for the Senate to do its part by approving the Smarter Solutions for Students Act and sending it to the President’s desk, where his signature would indicate that we’re ready to offer student loan borrowers long-term security and not more of the political status quo.