Congress returns today from its Fourth of July holiday (though given the level of maturity the body has shown over the last few years, it may be more accurate to use the technical term — recess). Hopefully, members are tanned, rested and ready. There’s plenty of work to do.
One of the first items on the agenda needs to be atoning for the shameful betrayal of millions of lower- and middle-class students and their families struggling to pay for a college education.
On July 1 — when most senators and congressmen had long departed Washington, D.C., for a leisurely weekend “in the district” — a key interest rate for a popular student loan was allowed to double.
The subsidized Stafford loans are used by an estimated 7 million students and families a year, accounting for a quarter of all direct federal borrowing. Last year, in yet another case of “kicking the can down the road,” Congress extended the 3.4 percent interest rates on those loans for a year in order to give legislators time to figure out a long-term solution to student borrowing.
In what should come as no surprise to anyone following the third-grade slap fight the 113th Congress has become, lawmakers squabbled among themselves for months, didn’t come close to solving the problem, then left for vacation.
In the meantime, the Stafford loan rate jumped to 6.8 percent last Monday. Congress’ Joint Economic Committee estimated the cost passed on to students would be about $2,600 each.
The debate over a long-term solution hasn’t just pitted Democrats against Republicans. Republicans are fighting Republicans. Democrats are fighting Democrats. President Obama’s budget, for example, would have tied student loan interest rates to the financial markets; others in his party rebelled, saying there was no guarantee the rates wouldn’t rise if the economy improved.
What’s worse, the hundreds of millions of dollars raised by the doubled interest rates is pure profit for the government. That’s right, parents — your child’s expensive student loan, the one he or she will be paying off for years after graduation, is a cash cow for your government. Salem Congressman John Tierney, citing a Congressional Budget Office report, says the government will make $51 billion on all student loans this year. Have to pay for those posh IRS conferences somehow, we guess.
Tierney, to his credit, has been a leader on the issue, both in pushing for a vote in the short term to keep rates from rising, and in the longer term by co-sponsoring a reform bill of his own.
Tierney’s bill would allow for adjustable rate loans to be tied to the 91-day Treasury bill, with a cap on the maximum rate that could be charged. It would also let borrowers with high fixed-rate federal student loans refinance those loans into the new variable-rate loans.
Tierney and U.S. Sen. Elizabeth Warren have both noted that a bank can now get a loan through the Federal Reserve at a rate of less than 1 percent. What’s wrong with this picture?
“Big banks can borrow at the FED discount window at much lower rates, and homeowners can currently refinance their mortgage at a little more than 3 percent,” Tierney wrote in an opinion column for these pages this spring. “Don’t students and their families who are trying to finance a college education deserve similar treatment? I think so.”
Tierney has a point, and his bill deserves a full airing, as do the other solutions being offered. All, of course, should have as a goal easing the burden on cash-strapped students, not adding more cash to the government coffers. And more attention needs to be given to the other end of the spectrum — the fact that the cost of college is rising more quickly than the ability to pay for it.
But first things first — Congress needs to fix the mess it created when it let loan rates double last week in the silliest of stalemates. These aren’t Republican families. These aren’t Democratic families. They are working American families trying to better their lot through education, and their elected officials are failing them.