http://www.npr.org/2013/06/28/196243698/student-loan-rates-set-to-double-on-july-1 Student Loan Rates Set To Double On July 1 by CLAUDIO SANCHEZ June 28, 2013 3:44 AM The interest rate on government-backed student loans is going to jump from 3.4 percent to 6.8 percent Monday. Republicans, Democrats and the Obama administration could not agree on a plan to keep it from happening. Lawmakers say a... [more]
http://www.npr.org/2013/06/28/196243698/student-loan-rates-set-to-double-on-july-1
Student Loan Rates Set To Double On July 1
by CLAUDIO SANCHEZ
June 28, 2013 3:44 AM
The interest rate on government-backed student loans is going to jump from 3.4 percent to 6.8 percent Monday.
Republicans, Democrats and the Obama administration could not agree on a plan to keep it from happening. Lawmakers say a deal is still possible after the July 4 recess. But if they don't agree on a plan soon, 7 million students expected to take out new Stafford loans could be stuck with a much bigger bill when they start paying the money back.
It has been one of the more heated debates in Washington this year.
Nella Lipton, a business major at the University of Maryland, says she tried to keep up with the news because she's taking out $10,000 in Stafford loans this school year.
"And it's kind of sad because you hear about everybody defaulting on their loans when they graduate, but I'm just hoping that with my major, I'll be able to get a job," Lipton says.
It upsets her that politicians would add to the stress by not having done something sooner to keep the interest rate from rising.
"They're sort of putting the burden on a younger generation, and once we are old enough to vote and once we're part of the economy and we ... default on our loans, it's going to be a big issue, and they're going to regret it," she says.
"Student loan interest rates shouldn't be a political football every year or every couple of years," says Peter McPherson, president of the Association of Public Land Grant Universities. He says the political impasse over student loan interest rates is serious.
"We need some way to stabilize this process in a way that maintains relatively low interest rates but also has stability," he says.
McPherson, a former deputy secretary with the Treasury Department, says of all the competing plans lawmakers have considered, the Republican plan and President Obama's plan make the most sense over the long term.
Both tie student loan interest rates to the 10-year Treasury rate, which is the market rate the U.S. government pays when it borrows.
It's All Politics
Obama Presses Congress On Student Loan Rates
"Just a little over 2 percent," McPherson says.
The president's plan would add another percentage point to that, pushing it up to about 3.4 percent — a rate that students would be able to lock in for the life of their loans.
"I think that's probably a realistic way to approach it," McPherson says.
Under the Republican plan, the interest rate for new Stafford loans would start at 5 percent and be allowed to float every year like an adjustable mortgage rate, but would be capped at 8.5 percent. The president's plan offers no such cap.
Why President Obama and Republicans continue to bicker considering that their plans are similar is disappointing — but not surprising, McPherson says.
"In Washington, we have a hard time doing anything short of the crisis, the cliff, the next moment. But I think in these plans, one could find an acceptable answer," he says.
Getting students and their parents to understand all of this, McPherson says, is not easy. These proposals are complicated.
Kyle Siefring, a political science major at the University of Maryland, is applying for his first Stafford loan this school year. He says politicians seemingly couldn't care less about the interest rate students have to pay — for good reason.
"College students don't vote like other people do," he says.
But there's a bigger problem, Siefring says.
"College students aren't the most financially literate people. They see a bill, and they just think about how they're going to pay it, and it's something that they can kind of slip under the table and not necessarily face the consequences right away. It's just something that they can kind of kick down the road," he says.
And that's just like what politicians in Washington do, Siefring says. Congress and the administration are reportedly close to agreeing on a plan to keep interest rates from doubling, but not before the July 1 deadline.
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Response by greensdale
over 12 years ago
Posts: 3804
Member since: Sep 2012
Today!
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Response by alanhart
over 12 years ago
Posts: 12397
Member since: Feb 2007
It doesn't matter much ... very few of the recipients of those loans will ever know what "percent" or "double" mean. But they'll be able to read the word "Big Mac" under its picture on the cash register, and that's something, right? Higher education for EVERYONE! Leave no man-child behind! Excelsior! With extra Special Sauce.
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Response by rangersfan
over 12 years ago
Posts: 877
Member since: Oct 2009
alan, i find it curious trying square your views on this and your recent posts on education given the rest of your wordly povs. i thought for sure a retired teacher/professor or even heaven forbid, an administrator. anyway, a bit puzzling to me unless i am missing an obvious progressive think on this topic....
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Response by alanhart
over 12 years ago
Posts: 12397
Member since: Feb 2007
No, my views all come together nicely. Education, particularly K-3, is critically important, should be compulsory, should be educationally progressive (meaning you can't progress to the next semester or even quarter unless you've mastered the one you're in) should not be a baby sitting service, should not involve social promotion, needs small class sizes and happy, *well-compensated* teachers who are in it for the long haul, and who truly receive support from departmental and city administration. Beyond that education should be tracked according to one's best chances for success and feeling of achievement. It should not from that point be a prison system, in which people are begged to "stay in school" (which is, of course, driven entirely by funding formulas that require warm bodies daily).
High school is SECONDARY education. My grandfather had an 8th grade education, but that didn't stop him from reading War and Peace, etc. in his leisure time. By 8th grade you should have all the skills that you need to learn more on your own, in Socialist workers' circle evening classes, in the corner of a pool hall, or even in a 12-room apartment in the Silk Stocking District while enjoying another sidecar.
"HIGHER" education requires more than some good weed. Loans, or better yet free education (as CUNY used to provide, and Cooper Union is now stopping) should be available ONLY for the academically elite who can benefit from it. Not as a phase-of-life bonding experience, or for networking, or to be the first in your family, or to keep you off the streets or out of the job market for a few more years, or to learn the correct proportions for just the right sidecar, but to, like, learn stuff, and stuff. ["Poli Sci? Oh -- its all about what's going on."]
It should not, by the way, be looked at merely as a trade school, to garner a higher income.
But the me-too effect, more recently pushed by lobbyists for-profit, not-for-profit, and finally government post-secondary schools of every stripe, means that loans (no longer direct-to-student grants, much) are dished out like cocktail napkins at Hooters, tossed by handfuls into the air by meth-addicted bartenders to make everyone think they're having fun. AA is a dirty word in every case, but while THAT one is a waste of time and spirit, the one relevant here is a waste of money and life-years. And then there are the "certificate" programs. Ugh.
The newest scam is for established universities to open satellite campuses in every small town across field and forest, so that town can skip the accreditation process altogether and start getting those loan-fueled warm bodies for ten years of college right away, helping to pay off ever-bloated executive salaries, pay off massive debts incurred via excessive campus construction ("Edifice Complex"), and pay "privatization"-based inefficient contractors for all sorts of things. But certainly not the instructors themselves, much.
Anyway, of course, the whole system is designed to guarantee massive unearned profits for big banks. Up the revolution! Sign the petition!!!
Does that clarify my position?
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Response by aboutready
over 12 years ago
Posts: 16354
Member since: Oct 2007
I think a lot of liberals are fed up with the higher education system, and the pervasive belief that going to college is almost always the best option, in the us. With the exception of the poor who are the brightest and the best, it seems deceptively discriminatory (socioeconomically), compelling many who can't afford it and who are not prepared for it into education that is usually worth nowhere near its cost. The returns are negligible, and frequently negative.
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Response by alanhart
over 12 years ago
Posts: 12397
Member since: Feb 2007
Exactly. City College (and Brooklyn, and Queens) were excellent models pre-1970. A small, elite group of people, mostly but not necessarily from poorish immigrant and first-generation families, attended for free, mostly lived at home, and either didn't have to work (allowing them the same total focus on studies and other forms of learning that rich kids got in college) or just work a little to chip in to their families, and buy books (which were then much less overpriced than today). Because taxpayers supported so few people, they could support them completely.
It parallels the public support of the very very rich -- our middle-class taxpayers were once able to completely support the very very rich, but now SO many people and corporations are very very rich that it's becoming harder and harder for the middle-class to foot their expensive lifestyles. So soon we'll be back to eating the rich, and the cycle continues.
But the increase isn’t quite as devastating as it has been portrayed. To start, the 3.4% rate has been in effect only for one year. The rate decrease was passed by Congress in 2007 when Democratic legislators made good on campaign promises and passed the College Cost Reduction and Access Act. After the law passed, the interest rate on subsidized loans fell each year until reaching 3.4% this year — the same year it was set to expire.
So rates are not going up but the reduction is going away, much the same as taxes didn't go up on the wealthy this year, they just lost their Bush deduction. See it's so simple, and illustrative how anything temporary is seen as permanent and hard to take away.
----------------------------------------------------------
Okay, back to July 1. Why are rates doubling on a quarter of federal student loans?
Because Congress keeps pushing the deadline back. This all started in 2007, when Sen. Edward Kennedy (D-Mass.) and Rep. George Miller (R-Calif.) put together the College Cost Reduction and Access Act, which gradually reduced the subsidized rate from 6.8 percent to 3.4 percent over the course of four years, with 3.4 reached in 2011. But for budgetary reasons that had to sunset. Originally it was going to expire in 2013, which was moved to 2012 as part of a compromise with Republicans.
As is usually the case, the media is confusing the issue, and inciting anger against the wrong people.
CONGRESS is not to blame for college students' crippling student loan debt. Frankly, I don't understand all this howling over a paltry extra 3-and-change% increase; MY student loans were 8% in the '80s and we thought THAT was a great deal. No one was ever killed by an extra 3% in interest, and even with this increase it's just over 6%.
The REAL issue isn't the interest rate, but the SIZE of the loans; college costs have skyrocketed, by some estimates, 1025.4% since 1980 (not a typo!).
The public should direct their anger not towards Congress, but towards academia; why DOES a bachelors degree cost more than a house these days? THAT's the issue.
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Response by Riversider
over 12 years ago
Posts: 13572
Member since: Apr 2009
These loans help enable NYU buying expensive apartments for their professors and staff such as Jacob Lew
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Response by Riversider
over 12 years ago
Posts: 13572
Member since: Apr 2009
The REAL issue isn't the interest rate, but the SIZE of the loans; college costs have skyrocketed, by some estimates, 1025.4% since 1980 (not a typo!).
That can't be right. The CPI says we don't have rising costs.
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Response by LICComment
over 12 years ago
Posts: 3610
Member since: Dec 2007
Congress is definitely a major part of the blame. If government wasn't providing these huge loan subsidies, tuitions wouldn't have been skyrocketing.
That said, the median student loan for a college grad is $13,000. That is not a terrible problem. Relatively VERY FEW grads have huge loans ($50,000 or more), and most of those are medical or engineering school grads, whom most will have very good earning potential.
Yes, there are a very small percentage of college grads who studied in areas that are low-paying and who have big loans, but shouldn't they be responsible for their own choices?
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Response by LICComment
over 12 years ago
Posts: 3610
Member since: Dec 2007
Congress is definitely a major part of the blame. If government wasn't providing these huge loan subsidies, tuitions wouldn't have been skyrocketing.
That said, the median student loan for a college grad is $13,000. That is not a terrible problem. Relatively VERY FEW grads have huge loans ($50,000 or more), and most of those are medical or engineering school grads, whom most will have very good earning potential.
Yes, there are a very small percentage of college grads who studied in areas that are low-paying and who have big loans, but shouldn't they be responsible for their own choices?
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Response by Riversider
over 12 years ago
Posts: 13572
Member since: Apr 2009
Most Stafford loans are already had the higher rate...
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Response by dcorreale
over 12 years ago
Posts: 99
Member since: Feb 2009
Absolutely right NYCMatt...education costs have blown away inflation, that is the real issue. There is nothing wrong with a 6% interest rate...US has to stop getting drunk off ridiculously low borrowing rates
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Response by rangersfan
over 12 years ago
Posts: 877
Member since: Oct 2009
well then, ah, i am amazingly completely in lockstep with you on this. thank you for clarifying....
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Response by rangersfan
over 12 years ago
Posts: 877
Member since: Oct 2009
that is, on education. not the eating our fellow man part. although it is quite apparent the government is doing its best to shred to the bone until not much is left for the masses.
'/%3e%3c/g%3e%3c/svg%3e)
Today!
It doesn't matter much ... very few of the recipients of those loans will ever know what "percent" or "double" mean. But they'll be able to read the word "Big Mac" under its picture on the cash register, and that's something, right? Higher education for EVERYONE! Leave no man-child behind! Excelsior! With extra Special Sauce.
alan, i find it curious trying square your views on this and your recent posts on education given the rest of your wordly povs. i thought for sure a retired teacher/professor or even heaven forbid, an administrator. anyway, a bit puzzling to me unless i am missing an obvious progressive think on this topic....
No, my views all come together nicely. Education, particularly K-3, is critically important, should be compulsory, should be educationally progressive (meaning you can't progress to the next semester or even quarter unless you've mastered the one you're in) should not be a baby sitting service, should not involve social promotion, needs small class sizes and happy, *well-compensated* teachers who are in it for the long haul, and who truly receive support from departmental and city administration. Beyond that education should be tracked according to one's best chances for success and feeling of achievement. It should not from that point be a prison system, in which people are begged to "stay in school" (which is, of course, driven entirely by funding formulas that require warm bodies daily).
High school is SECONDARY education. My grandfather had an 8th grade education, but that didn't stop him from reading War and Peace, etc. in his leisure time. By 8th grade you should have all the skills that you need to learn more on your own, in Socialist workers' circle evening classes, in the corner of a pool hall, or even in a 12-room apartment in the Silk Stocking District while enjoying another sidecar.
"HIGHER" education requires more than some good weed. Loans, or better yet free education (as CUNY used to provide, and Cooper Union is now stopping) should be available ONLY for the academically elite who can benefit from it. Not as a phase-of-life bonding experience, or for networking, or to be the first in your family, or to keep you off the streets or out of the job market for a few more years, or to learn the correct proportions for just the right sidecar, but to, like, learn stuff, and stuff. ["Poli Sci? Oh -- its all about what's going on."]
It should not, by the way, be looked at merely as a trade school, to garner a higher income.
But the me-too effect, more recently pushed by lobbyists for-profit, not-for-profit, and finally government post-secondary schools of every stripe, means that loans (no longer direct-to-student grants, much) are dished out like cocktail napkins at Hooters, tossed by handfuls into the air by meth-addicted bartenders to make everyone think they're having fun. AA is a dirty word in every case, but while THAT one is a waste of time and spirit, the one relevant here is a waste of money and life-years. And then there are the "certificate" programs. Ugh.
The newest scam is for established universities to open satellite campuses in every small town across field and forest, so that town can skip the accreditation process altogether and start getting those loan-fueled warm bodies for ten years of college right away, helping to pay off ever-bloated executive salaries, pay off massive debts incurred via excessive campus construction ("Edifice Complex"), and pay "privatization"-based inefficient contractors for all sorts of things. But certainly not the instructors themselves, much.
Anyway, of course, the whole system is designed to guarantee massive unearned profits for big banks. Up the revolution! Sign the petition!!!
Does that clarify my position?
I think a lot of liberals are fed up with the higher education system, and the pervasive belief that going to college is almost always the best option, in the us. With the exception of the poor who are the brightest and the best, it seems deceptively discriminatory (socioeconomically), compelling many who can't afford it and who are not prepared for it into education that is usually worth nowhere near its cost. The returns are negligible, and frequently negative.
Exactly. City College (and Brooklyn, and Queens) were excellent models pre-1970. A small, elite group of people, mostly but not necessarily from poorish immigrant and first-generation families, attended for free, mostly lived at home, and either didn't have to work (allowing them the same total focus on studies and other forms of learning that rich kids got in college) or just work a little to chip in to their families, and buy books (which were then much less overpriced than today). Because taxpayers supported so few people, they could support them completely.
It parallels the public support of the very very rich -- our middle-class taxpayers were once able to completely support the very very rich, but now SO many people and corporations are very very rich that it's becoming harder and harder for the middle-class to foot their expensive lifestyles. So soon we'll be back to eating the rich, and the cycle continues.
Everything clear now rangersfan?
http://www.huffpost.com/uk/entry/3527372?utm_hp_ref=uk
http://www.huffpost.com/uk/entry/3527572?utm_hp_ref=uk
But the increase isn’t quite as devastating as it has been portrayed. To start, the 3.4% rate has been in effect only for one year. The rate decrease was passed by Congress in 2007 when Democratic legislators made good on campaign promises and passed the College Cost Reduction and Access Act. After the law passed, the interest rate on subsidized loans fell each year until reaching 3.4% this year — the same year it was set to expire.
Read more: http://business.time.com/2012/03/20/students-your-loan-interest-rate-is-about-to-double/#ixzz2XqCDkaaO
So rates are not going up but the reduction is going away, much the same as taxes didn't go up on the wealthy this year, they just lost their Bush deduction. See it's so simple, and illustrative how anything temporary is seen as permanent and hard to take away.
----------------------------------------------------------
Okay, back to July 1. Why are rates doubling on a quarter of federal student loans?
Because Congress keeps pushing the deadline back. This all started in 2007, when Sen. Edward Kennedy (D-Mass.) and Rep. George Miller (R-Calif.) put together the College Cost Reduction and Access Act, which gradually reduced the subsidized rate from 6.8 percent to 3.4 percent over the course of four years, with 3.4 reached in 2011. But for budgetary reasons that had to sunset. Originally it was going to expire in 2013, which was moved to 2012 as part of a compromise with Republicans.
http://www.washingtonpost.com/blogs/wonkblog/wp/2013/06/13/everything-you-need-to-know-about-the-student-loan-rate-hike/
As is usually the case, the media is confusing the issue, and inciting anger against the wrong people.
CONGRESS is not to blame for college students' crippling student loan debt. Frankly, I don't understand all this howling over a paltry extra 3-and-change% increase; MY student loans were 8% in the '80s and we thought THAT was a great deal. No one was ever killed by an extra 3% in interest, and even with this increase it's just over 6%.
The REAL issue isn't the interest rate, but the SIZE of the loans; college costs have skyrocketed, by some estimates, 1025.4% since 1980 (not a typo!).
The public should direct their anger not towards Congress, but towards academia; why DOES a bachelors degree cost more than a house these days? THAT's the issue.
These loans help enable NYU buying expensive apartments for their professors and staff such as Jacob Lew
The REAL issue isn't the interest rate, but the SIZE of the loans; college costs have skyrocketed, by some estimates, 1025.4% since 1980 (not a typo!).
That can't be right. The CPI says we don't have rising costs.
Congress is definitely a major part of the blame. If government wasn't providing these huge loan subsidies, tuitions wouldn't have been skyrocketing.
That said, the median student loan for a college grad is $13,000. That is not a terrible problem. Relatively VERY FEW grads have huge loans ($50,000 or more), and most of those are medical or engineering school grads, whom most will have very good earning potential.
Yes, there are a very small percentage of college grads who studied in areas that are low-paying and who have big loans, but shouldn't they be responsible for their own choices?
Congress is definitely a major part of the blame. If government wasn't providing these huge loan subsidies, tuitions wouldn't have been skyrocketing.
That said, the median student loan for a college grad is $13,000. That is not a terrible problem. Relatively VERY FEW grads have huge loans ($50,000 or more), and most of those are medical or engineering school grads, whom most will have very good earning potential.
Yes, there are a very small percentage of college grads who studied in areas that are low-paying and who have big loans, but shouldn't they be responsible for their own choices?
Most Stafford loans are already had the higher rate...
Absolutely right NYCMatt...education costs have blown away inflation, that is the real issue. There is nothing wrong with a 6% interest rate...US has to stop getting drunk off ridiculously low borrowing rates
well then, ah, i am amazingly completely in lockstep with you on this. thank you for clarifying....
that is, on education. not the eating our fellow man part. although it is quite apparent the government is doing its best to shred to the bone until not much is left for the masses.