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Why Add Higher Rates To Student Loan Burden?

Congress has until July 1 to pass a bill that keeps interest rates on subsidized federal student Stafford loans from doubling from 3.4 percent to 6.8 percent. But instead of fixing the problem, the Republican-controlled House passed a bill mostly along party lines with the Orwellian name of "Smarter Solutions for Students Act."

Predictably, the proposal is neither smart nor a solution to rising rates of student debt that total more than $1 trillion and threaten our economy.

Instead of keeping student loans at a fixed rate, the House proposal would tie student-loan interest rates to the 10-year Treasury bill and make the rates adjustable once a year. The upshot: Students would be better off if Congress did nothing and just let the rates rise July 1 than they would be under this proposal, according to a Congressional Research Service analysis.

In response, Sen. Elizabeth Warren, D-Mass., proposed a bill that would lower student rates to the 0.75 percent rate that banks pay to the Federal Reserve for short-term loans. She's right that the U.S. shouldn't exploit student-loan debt to make money. But her proposal would only last a year. It buys time. Is it too much to ask Congress to set student loan rates for a longer period?

Rep. Joe Courtney, D-2nd, said he agreed with Sen. Warren, but a version of her bill has already lost in the House. "People have got to get out of the mind set that students are coddled because of the rates they pay. We don't think twice about banks getting a small interest rate," he said.

Mr. Courtney's student-loan proposal would keep the status quo, freezing the current low 3.4 percent rate for the next two years. That seems more politically viable.

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