Over 7 million students receive some sort of subsidized student loan from the U.S. federal government. That is a ton of debt and it’s getting larger every year: eclipsing credit cards and car loans, the figure right now stands at around $870 billion nationally. And, on July 1st, it could double in size.
As of now, students pay an interest rate of 3.4 percent for Stafford loans but, due to Congress’s constant evasion of the issue and short-term budget deals, the number will revert back to 6.8 percent that day if no action is taken. What does that mean for students?
The White House claims that an additional grand would be placed on top of loaners’ backs if nothing is done. But, thankfully, the timing comes at an opportune time: as the election nears, Democrats, including President Obama and New York Senator Chuck Schumer, are looking to keep students on their side of the aisle.
In an effort to avoid the college credit armageddon, Schumer is pushing forth legislation that will block the 3.4 percent increase by freezing the current rate for another year. But these are the kick-the-bucket negotiations that got us here in the first place: with the extension, Runnin’ Scared will probably find itself writing another article, identical to this one, a year from now about the impending loan crisis.
Although he can only use his bully pulpit, President Obama took a similar approach to Schumer today in his Sunday address, calling for Congress to get its act together fast because “we should be doing everything we can to put higher education within reach for every American.” Except one thing: July 1st also marks the day loans for graduate students will no longer be subsidized in order to increase Pell grants for undergrads – an act the Obama administration has more or less ignored
. One step forward, two steps backward.
For the Republicans, though, the student loan problem is a weird crossroads between a past disagreement and a future election. In 2007, the Congress made the 3.4% cut that is currently in effect but the GOP, although the bill passed with bipartisan support, was angry at the Bush administration for its deep cuts in the interest rates, arguing it would raise deficits and be wasteful spending.
Fast-forward five years: fueled by anti-spending fervor, the Republicans are much more unwilling to meet Obama halfway on policy or the budget. Romney will have to decide whose side he is going to take come July: his party or the 7 million students that are going to enter fall semester a thousand more dollars out.