First things first: Congress should extend the current 3.4 percent interest rate on student loans now. If it doesn’t act by July 1, the rate will double to 6.8 percent and the average student borrower will owe $1,000 more each year.
Senate Republicans say they support the rate reduction signed into law by President George W. Bush in 2007, but they blocked full consideration of a Democratic-sponsored bill earlier this month. The legislation proposed to offset the $6 billion cost by closing a tax loophole that allows rich individuals to reduce their taxes by filing as corporations.
Instead, Republicans want to make up the cost of the bill by cutting funding for preventive services in the Affordable Care Act (a/k/a Obamacare), specifically from things like breast- and cervical-cancer screenings.
When it comes to the student-debt crisis and the presidential campaign, President Obama has a different view of how it plays out in the lives of ordinary Americans from that of candidate Mitt Romney. Obama, 50, told a college audience last month that he and Michelle didn’t pay off their student loans until eight years ago. By contrast, Mitt Romney recently gave this advice to a student: “Go for it, take a risk, get the education; borrow money if you have to from your parents . . . .”
But realistically, neither party has proposed a long-term solution for the time bomb represented by the estimated $1 trillion balance owed on student loans. Actually, student debt represents several time bombs ticking simultaneously: There is the economic fallout of a default rate that has doubled in recent years. There is the drop in economic demand when many young people who are managing to make their loan payments are at the same time putting off investments in the future: buying a house, getting married, having kids.
But the most significant danger is the growing threat to even the fantasy of an American “meritocracy,” that this ticket to the middle class requires indentured servitude.
While there are many cautionary tales of students and their families taking out loans they should have known were too high to repay, a full 94 percent of bachelor’s degrees now involve borrowing — that’s compared to 45 percent in 1993, according to a report in last Sunday’s New York Times.
And the cost of a college education is on track to double in just 15 years by 2016. Here’s why: Adjusted for inflation, state and local spending per college student is at a 25-year low. State and local financing of higher education per student has gone down by 24 percent nationally. That’s consistent with Gov. Corbett’s recent proposal to slash 25 percent from the budgets of state universities. It should be no surprise that tuition and fees at state schools have increased by 72 percent.
Warnings that high school students and their families need to think carefully before they take on student debt go only so far — not if it means that, after careful consideration, non-rich students don’t get a quality education. What happened to idea that higher education is a public good that ought to be paid for by the public? n