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U.S. Opinions: Philadelphia

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Time to tame student debt

From an editorial published in Thursday’s Philadelphia Inquirer:

If Congress doesn’t act by July 1, college loan interest rates will double from 3.4 percent to 6.8 percent. But Washington is still dawdling even as students worry about whether they will be able to stay in school.

The proposed remedies range from a bill offering low-interest rates that could become prohibitively high to a measure that would reduce the rate to 0.75 percent. The divide suggests that Congress isn’t ready to make a deal. But students, like businesses, need predictability to make five- and six-figure educational investments.

House Republicans favor a bill sponsored by Rep. John Kline, R-Minn., and passed by his chamber last week. It would charge students the 10-year Treasury-note rate, which is currently around 2 percent but is expected to rise, plus 2.5 percentage points for undergraduates, capped at a rate of 8.5 percent. Graduate students and parents would pay the Treasury rate plus 4.5 percentage points, capped at 10.5 percent. The rates would vary from year to year based on market conditions.

The White House plan isn’t much better. It fails to set a limit on interest rates.

Senate Democrats aren’t doing a lot to help either. They just want to freeze rates at 3.4 percent for two years and solve the problem later. Based on recent history, “later” probably means never.

None of these plans recognizes the tremendous public benefit of an educated populace. People with postsecondary education are more likely to become self-sufficient, taxpaying members of the middle class. That contribution to the greater good and to democracy is worth something. And the loans themselves are also worth something to the government, which makes about $51 billion a year from them.

One bill that does acknowledge the value of an education is sponsored by Sen. Elizabeth Warren, D-Mass., who argues that students should pay 0.75 percent interest, as the big banks do. But her plan would last only a year.

Burying this problem for a year or two will only make it worse. College costs continue to climb, and student debt passed the $1 trillion mark last year, outpacing credit card and mortgage debt. Some economists say student debt could bring about the next crisis similar to the mortgage meltdown.

Student loans shouldn’t be free, but they shouldn’t be impossible either. Borrowing expenses should cover the cost of administering the program but no more. The benefits to the nation are reason enough to make college affordable.

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