It comes as no surprise that a deadlocked Congress missed the July 1 deadline to pass a bill that would have kept the interest rates on federally subsidized Stafford student loans from doubling from 3.4 percent to 6.8 percent, as required in 2007 legislation. The bitterly divided national legislature barely gets anything of importance done these days.
With the deadline and the July 4 holiday behind it, the Senate tried again Wednesday — and failed on a procedural vote — to bring up a bill to restore the interest rate on Stafford loans to the lower 3.4 percent for one year. A cloture motion to break a Republican filibuster lost on a 51-49 vote. One year would at least have bought time for a long-term solution.
It's well past time for action. It would be wrong to saddle students with an even greater debt burden. Student debt now tops a scary $1 trillion.
The government already makes money off of student loans — $51 billion in profit from this year's loans alone, according to the Congressional Budget Office. It isn't in the national interest for the government to squeeze even more money out of higher education students.
House Republicans have passed a bill tying student loan interest rates to the government's cost of borrowing. The rate on a Stafford loan would be adjustable from year to year depending on the rise and fall of the 10-year Treasury note yield, capped at 8.5 percent. That would increase the cost of borrowing — the wrong way to go.
Democratic U.S. Sen. Elizabeth Warren of Massachusetts introduced legislation this spring that would lower federal student-loan interest rates to the 0.75 percent rate that banks pay to the Federal Reserve for short-term loans. Why should big banks get cheaper money than students? she asks. But that rock-bottom rate would last only for a year.
Something must be done on a permanent basis to fix the problems of college affordability and student debt.
The nation needs as many graduates as it can educate to remain competitive and strong. Rapidly accumulating student debt is a drag on the economy, taking money that would otherwise go for such big-ticket items as car payments or to buy a starter home.
A low-interest, fixed-rate student loan is part of the answer.