By Sarah Wright
Student Loan Interest Rate Hike on the Horizon
There's another partisan dispute to add to the list of election-year squabbles: student loan debt. As of early April, Democratic lawmakers were working to find a solution to a $6 billion problem. That problem is the impending doubling of the current interest rate for federal student loans. Currently, House Republicans haven't made room in the federal budget for the additional $6 billion that would be necessary to avoid this interest rate raise.
The answer to the question of whether or not this would be good for students depends almost entirely on what your political priorities are. If you believe that the government is responsible for ensuring fair access to quality education for all citizens, including those in lower income brackets, political pressure on this issue is going to be a good thing. But if you're of the belief that funding education isn't the proper role of government, it's not likely that you'll be thrilled about the kind of attention this issue is likely to attract.
A Reversal on Loan Debt from Republicans?
It seems inevitable at this point that Mitt Romney will become the Republican nominee for president. Though he's a relative moderate in a field that includes Newt Gingrich, the man behind the 1994 federal government shutdown, Romney has made his feelings about federal education funding clear, saying 'It would be popular for me to stand up and say, 'I'm going to give you government money to pay for your college,' but I'm not going to promise that.' He's right that it would be popular, and there's a good likelihood that too much anti-loan campaigning will backfire on him. The idea of federal student loans are generally looked on favorably, and few of the tens of millions of student loan debt holders in the U.S. are going to be enthused about having to pay even more interest every year.
The fact is that Republicans haven't always taken such a harsh stance on this issue. Thanks to pressure from small-government ideologues, GOP leaders have adopted a slash-and-burn mentality toward federal spending, especially when it comes to non-military funding for things like education and social welfare. But the current mindset represents an ideological shift for the mainstream of the Republican party. In 2007, President George W. Bush signed the College Cost Reduction and Access Act, which, among other things, lowered interest rates for federal loans and introduced debt forgiveness programs. According to Politico, Republican members of Congress supported the act, including some who are still in office today.
It seems unlikely that any but the most staunchly partisan Republican students and parents would be enthusiastic about the prospect of increased interest for federal loans, to say nothing about the prospect of a total elimination of federal higher education funding. Romney has suggested that those who need help paying for college should join the military, which seems like a harsh trade-off that's unlikely to bring moderate and undecided voters to his corner. The political motivation for this type of rhetoric seems clear, given the strength and organization of nationalistic anti-government groups like the Tea Party. It wouldn't be very politically expedient for a Republican presidential candidate to champion loan forgiveness and increased education spending. That's understandable from an election-specific strategic standpoint, but the question remains: is this really the best move for a populace already saddled with a tremendous amount of debt?
Recently, the Consumer Financial Protection Bureau announced that U.S. citizens collectively hold a staggering $1 trillion in student debt. This at a time when many are turning to education as a means to secure a good career in the most unstable job market we've seen in decades. Doubling interest rates for Stafford loans could end up costing individual debtors thousands of additional dollars. This is particularly significant when one considers the fact that student loan debt cannot be forgiven in bankruptcy proceedings. These are troubling facts, and would be sharp weapons in the quiver of a politician who wants to drum up federal support for student loan debt holders. In this sense, it does seem that more political attention to this issue could end up being a good thing.
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