As if tough economic conditions and tuition hikes didn’t make things bad enough for college students and recent graduates, Congress allowed the interest rate on the subsidized federal student loans to double from 3.4 percent to 6.8 percent this month. The borrowing costs of more than 7 million college students doubled due to a combination of procrastination and gridlock in the nation’s capital.
Eventually, some signs of progress were made. Last Wednesday, a bipartisan group of senators reached a deal that would give college students better rates on their federal loans. Unfortunately, the low interest rates afforded by this deal would likely be temporary, as the rates would be tied to the financial markets. A cap would be set at 8.25 percent for undergraduate students.
Though for the short term this plan is better than allowing rates to remain at 6.8 percent, the agreed-upon cap is much too high. Unless lawmakers can agree on a more reasonable cap, they should extend the 3.4 interest rate for another year.
However, regardless of what plan gets passed, it is necessary that Congress seriously address the overly complex federal loan process and make comprehensive changes to keep college affordable for years to come.
Most importantly, talks of deficit reduction should no longer have a place in congressional decisions over financial aid, as has been the case this summer. Cutting back on investments to students as a cost-saving measure is absurd. USA Today reported that the current deal was estimated to reduce the deficit by $715 million in the next 10 years, which would not make a dent in the national debt but could make a real difference in making college more affordable.
If those in Congress actually care about ensuring a highly educated and competitive American workforce, they should focus on creating a more stable and beneficial financial aid process to help middle- and low-income families.
