EDITORIAL: Roll back rates on college loans

If members of Congress want to show their love of country this Independence Day, they can start by showing love to America's debt-ridden college students.

Lawmakers should come back after the Fourth of July holiday recess and fix the student loan mess they have saddled college students with. Congress had a full year to deal with the problem but couldn't work out a solution, and the result was that on Monday, interest rates on Stafford loans doubled from 3.4 percent to 6.8 percent for 7.4 million students.

Both Democrats and Republicans have agreed they never wanted the rates to automatically double, but the fight has been over how to structure student loan programs to limit the impact on deficit spending.

The estimated extra costs for students from the higher rates, according to Congress' Joint Economic Committee, is $2,600 over 10 years.

There is still a possibility that Congress could come back and retroactively roll back the higher rates for students borrowing for this fall. The Senate is set to vote on a bill that would simply keep the 3.4 interest rate in place for another year.

That's kicking the can down the road, and we have to wonder whether another year of thumb-twiddling in Congress would solve anything.

Both House Republicans and President Barack Obama propose tying the rate of student loans to the interest rates on 10-year Treasury notes. The House proposal, though, would add another 2.5 percentage points to rates for Stafford loans and cap interest rates at no more than 8.5 percent.

By contrast, Obama's proposal calls for lower rates ? the 10-year Treasury interest rate plus 0.93 percent ? but also, importantly, fixing those rates for the life of the loan rather than being reset every year. He wants to couple that with his proposal to cap repayment at 10 percent of discretionary income for borrowers.

We're open to the idea of tying the loan rates to Treasury rates, but we also like the notion of certainty for students that lasts for more than a single year. And we'd like to see more Democrats support the president's proposal or for Obama and Republicans to move closer on the issue.

What Congress should not allow to happen is another year lost in gridlock on this issue. Student loan debt in this country is now approaching $1 trillion, more than credit card debt and auto debt. Continued...

According to one report, the average student loan debt is up $26,000. Burdened with this kind of debt, college graduates are now postponing home ownership, car purchases and the use of credit cards. They are also taking immediately obtainable lower-paying jobs simply so bills can get paid, as well as avoiding risks, including starting new businesses, according to a report from the Federal Reserve Bank of New York.

That has disturbing implications for both the future of those young people and the overall economy, and Congress should do something about it by taking action on student loans.

Editorial courtesy of the Denver Post, denverpost.com.

Source: http://www.registercitizen.com/articles/2013/07/06/opinion/doc51d718c4cdf5b820818756.txt

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