Tuesday, April 24, 2012 | 2:01 a.m.
Beyond the Sun
For all the politically charged rhetoric that separates Democrats and Republicans, there are the occasional areas of common ground. One surfaced on Monday.
President Barack Obama heads off to three swing states today — Colorado, Iowa and North Carolina — pushing a Democratic-sponsored bill that would prevent student loan interest rates from doubling from 3.4 percent to 6.8 percent.
Among those who agree with him is Mitt Romney, who on Monday said he supports the measure to keep the student interest rates at 3.4 percent, citing “the extraordinarily poor conditions in the job market.”
According to a White House estimate, the rate hike would cost the average Nevada borrower about $982 over the life of the student loan.
Student loan rates are set by Congress and were last written into law in 2007. For the last few years, they’ve been going down — from 6 percent in the 2008-09 academic year to 3.4 percent this year.
But there’s a renewed urgency in keeping the interest rate at that level. Recently graduating students are contending with an abysmal job market; were the interest rate hike to kick in, they would be facing that job market with one of the most expensive loan obligations on the market, as low federal interest rates have kept most other loan rates low. The average interest rate for a mortgage, for example, is only about 4 percent.
This year, student loan obligations also outpaced credit card debt for the first time: The average student now owes more than $25,000 in student loans. It’s a sign more people are investing in their education than in consumer goods, which makes sense during a recession. But it’s also troubling, as student loans are the one kind of debt that one can’t default on. Paying it off is the only option — which is why so many lawmakers are concerned about the cost of an education getting more expensive with the new loan rates.
But not everyone agrees with the method of keeping interest rates as they are for students.
House Rep. John Kline, who heads up the Education and Labor committee, said in a statement that the change would cost the government about $6 billion and blamed what he classified as a catch-22 situation on Obama.
“Bad policy based on lofty campaign promises has put us in an untenable situation,” he said. “We must now choose between allowing interest rates to rise or piling billions of dollars on the backs of taxpayers.”
Congress did institute some sweeping changes to the student loan industry under Obama’s watch. In 2009, Congress passed a law that centralized the education loan industry by making private companies compete to service, but not disburse, government loans and also instituted an income-based repayment system that partially forgave the debt of low-wage graduates or those who went into long-term public service.
Private loans are still more expensive than government-backed educational loans. But the restructuring of the system has affected the rate at which students are paying back the government loans to which they now have easier access.
Democrats in Congress argue that the cost to the government isn’t just about the bottom line, it’s about public responsibility.
“With middle-class families and fewer students able to afford the rising cost of higher education, we cannot afford to put college out of reach for more promising young people,” Nevada Sen. Harry Reid said. “The business community agrees making college affordable is key to keeping America competitive in a global economy. An investment in education is an investment in our economy.”