Congress, cramming for the upcoming election, will vote on legislation Friday that would prevent interest rates on student loans from doubling to 6.8 percent from 3.4 percent on July 1.
President Barack Obama supports the idea. Likewise putative Republican challenger Mitt Romney.
But you need look no further than the distinctly different plans to pay for the change to understand again why this Congress gets such a failing grade from Americans.
The plan that will go before the Democrat-controlled Senate backfills the $5.9 billion one-year cost of the freeze by raising payroll taxes on private corporations that doctors, lawyers and some banks use to shelter earnings.
In the House, Republicans would deduct the money from a $17 billion fund set aside under the Affordable Care Act for immunization, education and related purposes.
You don’t have to take Chemistry 101 to predict the result: lots of sparks, but no useful compound.
Both parties are treating students like lab rats. Young voters were an important component of Obama’s 2008 election victory, but the sluggish economy has been a dreadful jobs incubator. Graduates emerge from academia with an average of $25,000 in loans, although the median is about one-half that. If you are underemployed or unemployed, as many are, that is a lot of money, even if changes to government loan programs have given borrowers options such as pegging payments to income, with potential forgiveness of remaining balances after 20 years – a very distant salvation.
This year’s class will be the most indebted ever. And total student debt recently climbed past the $1 trillion mark, more than the total for credit cards. Some 7 million people are in hock for their education, and a substantial number are delinquent.
Student loans are one of the few kinds of debt that cannot be shed in bankruptcy.
The impending jump in interest rates was a made-to-order opportunity for the president, compliments of Republicans who last month overwhelmingly passed a budget that would allow the student loan interest rate to double. Romney endorsed that budget.
Friday’s vote will be an emergency about-face, likely one that will be repeated as Democrats identify items in the blueprint drawn by Rep. Paul Ryan, R-Wis., that are the most politically repulsive, and force votes on countermeasures with no hope of passage.
Obama, for his part, insists on conflating the student loan issue with references to tax breaks for Big Oil. Can we skip that class?
Neither party will allow the loan rate to double. The trick will be finding the most expedient way to shift the cost, probably to future generations of taxpayers. The cost of America’s higher education system, our single biggest advantage in the global economy, has become a nightmare for students, parents and the states, which continue to increase tuition.
Perhaps a freeze on rates should be paired with a cap on loans available. As long as the federal government pumps low-cost credit into higher education, the debt problem will only get worse.