With federal college loan interest rates set to double on July 1, President Obama and some members of Congress are clashing over how best to address the issue. The Interest Rate Reduction Act, sponsored by Rep. Julie Biggert, R-Ill., passed the House last week by a vote of 215-195. But Obama has promised to veto the measure because he believes it is too limited.
Amid the political jockeying, approximately 7 million college students from middle- and low-income families are still wondering what will happen if no legislative compromise is found. Even without an interest rate increase, the Consumer Financial Protection Bureau concluded that outstanding student debt will top $1 trillion, higher than even the debt accumulated on credit cards.
According to the Congressional Budget Office, freezing loan interest for just one year would cost the federal budget $6 billion. A companion bill sponsored by Biggert would strip $6 billion from money set aside for health care reform’s Prevention and Public Health Fund to cover the cost of the one-year extension.
The real issue for students, parents, and federal decision-makers is whether Congress will once again provide bipartisan support to contain the rising cost of higher education borrowing. In 2007, the College Cost Reduction and Access Act passed with significant support across party lines. A majority of lawmakers agreed to cut the college loan interest rate in half, from 6.8 percent to its current 3.4 percent.
Earlier this year, legislation was introduced by two Democrats, Sen. Jack Reed [R.I.] and Rep. Joe Courtney [Conn.] to permanently set the loan interest rates at 3.4 percent. It attracted 15 co-sponsors in the Senate and 127 in the House. Still, neither of these bills received a hearing, normally the first step toward a floor vote. With House passage of a one-year interest rate extension, these two bills are in a legislative no-man’s land, students have been handed a 1-year reprieve on costs; and no one can say with certainty when or if a permanent solution will be found.
“The prospect of raising student loan rates is like nails on a chalkboard,” said Sen. Charles Schumer, D-N.Y., “College tuition has skyrocketed at universities and colleges across the country, placing a huge burden on middle class families.”
Many college students agree. In recent days, several college and university newspapers have reported on this looming issue, some taking an editorial stand on what it means to today’s collegiate.
West Virginia University’s Daily Athenaeum, for example, said in an editorial, “Students are already struggling to keep up with rising tuition and living expenses and, if anything, the government should be working to make college more accessible to high school graduates.”
The Minnesota Daily, the University of Minnesota student newspaper, argued, “Student debt throughout the U.S. has compelled recent graduates to put off choices such as home-buying, marriage and childbearing. One in four young Americans have moved back in with parents after having lived elsewhere. The delay of such choices has an impact on the overall economy causing some to call student debt a new ‘bubble.’”
Analyses by researchers at Northeastern and Drexel universities as well as the Washington-based Economic Policy Institute found that more than half of last year’s bachelor’s degree graduates under the age of 25 were either unemployed or under-employed. This disastrous economic measure was felt by 1.5 million graduates. Further, just last month the nation’s student debt surpassed $1 trillion and continues to climb.
For African Americans, the rising cost of higher education poses a unique predicament. In 2010, according to BlackDemographics.com, Black college student enrollment totaled 3.8 million. While this figure represented a 2 million increase since 1993, the number of Black college graduates with a bachelor’s degree has increased just one percentage point since 2000 and is still 10 percentage points lower than the overall rate of graduates for the entire country.
These statistics suggest that while many Black students enroll in colleges and universities, far too many fail to graduate. Consequently, many Black students leave college without a degree, but must pay back those loans without the higher incomes derived from holding a college degree.
As Senator Reed said, “Making college more affordable is key to unlocking America’s economic competitiveness. Business leaders know it is vital for young Americans to get an education beyond high school. If today’s students cannot afford college, businesses will not have the workers with the education and training they need to keep our economy competitive and dynamic far into the future.” — (NNPA)