President Obama has been talking up the student loan issue, in the context of a scheduled rate-doubling for income-subsidized, federal Direct Stafford loans issued after July 1, 2012. The rate is scheduled to go from 3.4% to 6.8%. (This affects fresh loans, not ones already taken out.)
The rate on unsubsidized Staffords has been 6.8%, and continues to be.
This is the third major foray by the President into the student loan issue. You may recall that, around the time the Obamacare (Affordable Care Act) was signed into law, Congress also ended the ability of private banks to make government-backed student loans. The Republicans cried “socialism” about that one, too. But no one was able to explain why having a private business offer you a loan, for a healthy cut, that is backed by the federal government if you don’t pay, is socialism. It sounds like it was socialism for the BANKS!
Then, last fall, Obama had the Department of Education change the regulations about Income Based Repayment (IBR), to make those having taken out loans since 2008 to get a 20-year payback at 10% of discretionary income. Still ridiculous, of course, when you consider that your tax money should be providing grants for education, like how it was in the 1960’s and ’70’s. But nevertheless, it’s a movement in the right direction.
Now, President Obama is speaking up about the need to keep that borrowing rate at 3.4%. After all, you know, Congress can borrow money for the Treasury at 2%. So the student borrower is still getting ripped off. They say the move will cost the Treasury $6 billion. But what they don’t say is that this “cost” is really the profit of borrowing at 2% and lending it out at 6.8%.
I am still, ultimately, in favor of Congressman Hansen Clarke’s proposal to make IBR into a 10%-for-10-years repayment plan. So, like a student loan from the 1970’s, when most of the aid money was grants anyway.
When I got my student loans (1983), it was right around the time that the GOP and the Reagan Administration started sticking it to the hippie kids (even though they were about a generation too late). The Baby Boomers didn’t give a squat, because they already had their sweet college deal, and were more interested in government spending for their minimansions and company health insurance. Now that their own children are getting to feel the water hitting their back, this issue of fair student loans is popping up again.
It’s good to see the President being frank, and saying that his and his wife’s loans didn’t get paid off until he was a United States Senator and an accomplished author. He appreciates the fact that student borrowers in this country can’t just write a book about their family, or their thoughts, and make the loan go away. The man has a heart.
It’s time for more Congress members to show that they have a heart, and endorse the Hansen Clarke proposal, H.R. 4170.