Cheers to Congress for holding interest rates on college loans down. Instead of doubling to 6.4 percent, the interest rate on federal college student loans will remain at the 3.2 percent level. However, this proviso is only in effect for one year. This time next year, Congress will be waging the same fight.
Young people, especially those enrolled in higher education and recent college grads, along with those who work in education, especially higher education, might want to think about these things when they head to the polls in November.
Of course Mitt Romney might ask why the entire population ought to subsidize loan rates for college grads who needed to borrow to complete their educations. Why should we subsidize anybody? We subsidized the automobile industry with low-cost loans because it helped up shore up our nation’s economic strength. We subsidized banks with virtually no-cost loans because they were, supposedly, “too big to fail.” We subsidize homeowners by allowing them to deduct the mortgage interest of their loans. Why not subsidize the students whose college completion holds up our economic futures?
President Obama says he wants our nation to lead the world in the percentage of our population who has either an AA or a BA degree. We won’t do that unless we help students who come from low and moderate-income families with their college costs.
Despite holding interest rates down, Congress has found other ways to hurt college students. Effective this Sunday, the federal government will no longer subsidize interest on loans. That means that if a student takes out a loan to pay for her education, she must immediately pay the interest on that loan. In the past, those interest costs were subsidized, and students did not have to worry about paying their loans back until after graduation.
Students take out loans because they don’t have the money to pay for graduation. Many also work long hours to pay for food, and other necessities. Now, we are planning to add interest rate payments to this burden. Congress might as well say “bah, humbug” to students, especially after they’ve chosen to keep interest rates down.
Further, graduating students will have to pay their loans back as soon as they graduate, not with the six-month grace period they previously enjoyed. This makes no sense! Many students do not graduate with jobs already lined up; they graduate while looking for jobs. So many have experienced job setbacks that they are moving back home with mom and dad.
Again, it has been a matter of public policy to delay loan payments for some subgroups of people. We have, for example, agreed to restructure mortgage rates for some mortgage holders; we have allowed large companies in trouble to both take out subsidized loans and also to delay repayment on them. We say we believe our young people are our future, but we hold them to harsher standards than corporations. Congress says its two moves will save the treasury $20 billion, and that in times of economic challenges they have to save every penny they can. But at what cost and to what end?
If these increased costs push some students into deferring education, our nation is, in the long run, a loser. If some decide that a BA degree is enough, even though they were headed toward that science Ph.D., then we are all losers. This Congress has chosen to be extremely shortsighted, and to wrap their limited vision in incendiary rhetoric about budget balancing. I don’t blame this Congress. They have been empowered to behave poorly. I blame those voters who have selected these people as leaders.
The misplaced priorities of this Congress are most clear when we look at their preoccupation with finding Attorney General Eric Holder in contempt of Congress. Our nation is worried about jobs, but Congress is mistakenly worried about wringing nonexistent or privileged documents from a civil servant whose leader has declared executive privilege. Congressman John Boehner (R-Ohio) and his cronies are making a point that they do not believe President Obama deserves executive privilege.
What do our nation’s college students deserve? They need more than balanced-budget rhetoric. They need access to low-interest loans, as well as a suspension of payments while they are looking for work. They need the appreciation and respect of the lawmakers who are too busy chasing their tails to stop and shake the hands of deserving students.
Julianne Malveaux is a Washington, D.C.-based economist and writer. She is President Emerita of Bennett College for Women in Greensboro, N.C.