Congress should be helping to keep college affordable, not making it more expensive for student loan borrowers to pay for college
Unless Congress acts decisively, the interest rate on new Federal Subsidized Stafford student loans will double from 3.4 percent to 6.8 percent on July 1, 2013. A 2007 college affordability plan gradually reduced the interest rate from 6.8 percent to 3.4 percent through 2012, when the rate was scheduled to revert to 6.8 percent. Last year, in the midst of the election cycle, motivated primarily by sluggish economic conditions, President Obama and the Congress led the successful effort to extend the low 3.4 percent rate for one more year.
Students have already suffered from a variety of aid restrictions and limitations that resulted in students contributing $4.6 billion to deficit reduction.
Since the federal government makes 36 cents on every dollar loaned, increasing interest rates simply increases the government’s profits from students.
We need to overhaul the student loan system so it is equitable to all borrowers. Such a comprehensive approach will take and must provide ample opportunity for participation by borrowers and the general public.