Student Loan Rates Don't Need to Double

Statement

On July 1, the rates for student loans administered by the federal government are set to double from 3.4 percent to 6.8 percent. Why is this going to happen? Simply put: politics.

Student loan rates were set at 3.4 percent for political reasons, and now they are going back up in an attempt to score cheap political points. We need to put an end to this Washington game and create a sensible process for setting rates.

First of all, how did we get here? In 2007, the Democrat-led Congress passed legislation to reduce interest rates over a period of years down to 3.4 percent. However, the bill played an old Washington budget game and had the rates doubling back to 6.8 percent in 2012. Last year, Republicans supported an extension of the current rates with the assurance that we would work over the next year for a permanent solution.

Now, we are at the deadline again. House Republicans passed a plan, but the Senate did not take that plan up or put forward one of their own.

The House plan calls for setting the rates based on the 10-year Treasury note plus 2.5 percent for undergraduate loans and plus 4.5 percent for graduate loans. These rates would then be capped to ensure that even when government interest rates are high, students don't have to pay too much.

That takes politicians out of the equation. We only have to look at what happened this week to see why we want to do that.

For weeks, Congressional Democrats have been publicly trying to blame Republicans for wanting rates to double. The President held a press conference with students standing behind him while he castigated the House of Representatives. The political wings of the party placed advertisements in student newspapers and put out messages on Facebook and Twitter prompting students and families to call their congressman.

From the President's rhetoric, you wouldn't know that his plan and what we passed in the House are astonishingly similar. Our bill is actually based on a proposal contained in his budget this year.

This week, Democratic Senators finally woke up and realized that their leadership didn't really seem to want a bill passed in that chamber. Senator Joe Manchin (D-WV) put together a bipartisan proposal that is similar to what we've done in the House. The Democrat-leaning senator from Maine and three Republicans joined him on the bill.

However, Senate Majority Leader Harry Reid refused to let the bill be considered. Fellow Democrats refused to even try to amend the bipartisan language to make it more to their liking.

A few Democrats now want to pass another yearlong extension of the current rates. I used to be a high school teacher, and this sounds a lot like some excuses I used to hear about homework.

The initial legislation to lower rates was simply put forward so that members of Congress could brag about helping students. Going to college is a good thing and low, stable interest rates certainly help students. However, pandering to students and parents only leads to a raw deal for taxpayers. Let's not forget, students and parents are current taxpayers or future taxpayers.

Student loans are backed by public money. Theoretically, the program is supposed to support itself through interest. Taxpayers shouldn't have to foot the bill if interest rates are set at a proper level. Currently, student loan debt is at a record high. Among economists, there is great concern that this student loan bubble could collapse leaving taxpayers holding the bag for another big bailout.

I want to support kids going to college. We have the best higher education in the world and we want students of all income levels to have full access, but we have to be prudent.

We have to remember that one day those students will come out of college and look for a job. They will have to pay off their debt and pay their taxes. If government-backed loans don't pay for themselves, students will ultimately end up paying twice. That isn't fair for anyone.

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