Economy

The student loan interest rates are too damn high

Like many other twentysomethings, I was watching the Daily Show the other night to see what news Jon Stewart and his crew were mocking/making sense of, and the middle segment hit a little close to home.

Obviously, this is meant to be a goof. Education is a wonderful thing, and encouraging people not to go to college because of high costs is an exaggeration for comedy. But behind the humor (and the wisdom that illustration may have been a bad degree program to pursue), The Daily Show nailed it – education is too expensive, and the costs are only going to go up.

Last year, Congress decided to keep interest rates on Stafford Loans and other student loans locked in around 3.4% – but like everything else Congress seems to do these days, this was only a temporary fix. The fight is going to start again in July, when the student loan rates are set to double to 6.8%. College is already far too pricey for many to attend, and this double in interest rates will put a higher education even farther out of reach for thousands of students and their families.

Thankfully, a progressive former professor got elected to the Senate this year, and wants to do something about this. For her first standalone bill in the Senate, Senator Elizabeth Warren introduced the Bank on Student Loans Fairness Act – a law designed to lower interest rates on student loans and make it easier for working class families and students to attend college. Check out this segment:

She makes a great point when she says that “We the taxpayers make an investment in our financial institutions. Can’t we make the same investment in students who are trying to get an education?”

I’ve talked before about how expensive it is to go to college, and the ramifications of student loans going forward – the consequences of a poor rising working class. And this bill would make a huge step towards making college more affordable for thousands more students, and make a significant investment in the middle class. We just need to get it passed.

Senator Warren is right on the money when she says “If the federal reserve can float trillions of dollars to large financial institutions for low interest rates to grow the economy, surely they can float the Department of Education the money to fund our students, keep us competitive, and grow our middle class.”

I encourage you to sign on to the Campaign for America’s Future and Daily Kos’s petition to support Elizabeth Warren’s bill here. Investing in our students, rather than our banks, and helping ambitious students – the scientists, teachers, writers, doctors, engineers and workers of tomorrow – get the training they need to compete, is a step towards a stronger middle class and a stronger economy.

5 replies »

  1. Like mortgages, can’t the “graduate” be used as collateral to secure the loan to reduce risk and help keep the rates down!? 🙂

  2. it’s not loan rates, it’s exorbitant inflation in tuition. colleges have used the myth that degrees are a good investment the same way mortgage brokers used the old saw that houses never fall in value to dupe the innocent. the ones who should be going to jail are professors who earn six figures and teach one class a year and universities that have greatly increased their offering of bogus degrees.

    • I don’t disagree, tuition and university fees are ridiculous – and we’ve created a culture where you’re worth less without a college degree, no matter how bogus that degree is, that making that investment in yourself at whatever rate is being charged is both a luxury AND a necessity. The cost of college is not a single solution issue, it is a comprehensive problem. A lot needs to change. But banks taking advantage of students who are too poor to afford an education on their own, by charging them exorbitant interest rates they will struggle to pay back for another 20 plus years, is not right. Especially when billion dollar corporations are paying a lower rate.

    • Oh please. There are profs who fit that description, and they all have something in common. They’re researchers who’s salaries and operations (labs, staff, etc.) are being funded in large part by corporate grants. They aren’t why tuition has gone sky high. That honor falls to administrators who have invested heavily in facilities that are mainly marketing tools – shiny new student centers, for instance – because that, and not professors, is what impresses today’s college-bound student.

  3. Having recently put three kids through college (two at expensive private schools and one at a relatively reasonable public school) I have some knowledge and experience in this matter. I started watching tuition and other costs of college roughly 20 years ago. Back then the rule of thumb was that the cost of college rises about twice the rate of inflation (not as much as drugs and medical costs but still) or, back then 7% a year. And I have seen a couple analyses that show graphs that compare college costs with the amount of money made available by the federal government through grants, scholarships and loan programs. The curves are eerily similar.

    The colleges and universities are harvesting the money. Looking at whether the money goes to over paid professors us excessively opulent buildings or athletic programs or whatever are red herrings. They are going to harvest the money and then find something to do with it. That is why Senator Warren’s plans won’t work. Put more money out there and the colleges and universities will harvest that and still max out all the student and parent loans.

    Don’t know the solution but I do not think it is more government money — at least not by itself.