Stop big hike in college loan rate

If

nothing changes, the interest rate thatlow- andmoderate-incomecollege graduates pay on federally subsidized Stafford Loans will double for new loans made after June 30 from 3.4 percent to 6.8 percent. The result of this policy would be to bury college graduates even deeper in debt and increase defaults.

The pending increase is more troubling because it comes at a time of historically low interest rates. It would fly in the face of what policymakers should be doing — working to make college more affordable and provide college graduates with the ability to be productive consumers. Many graduates find themselves so in debt that they cannot hope to buy a home, purchase a vehicle or find the money to start a business.

College graduates should help fuel the economy, but many are having difficulty finding jobs or have to settle for positions for which they are over skilled and underpaid. Combined with the massive loan obligations that many graduate with, these graduates are more a drag on the economy than a shot in the arm.

So whywould Congress raise interest rates on student loans?

In 2007 Congress approved the College Cost Reduction and Access Act of 2007, which cut the then-rate of 6.8 percent to the current 3.4 percent, phased in over four academic years. That reduced rate is set to expire July 1.

Eastern Connecticut’s own Second District congressman, Rep. Joe Courtney, a Democrat, has introduced a bill to extend the lower rate.

The proposal faces opposition from those who contend the federal government cannot afford to sustain the lower rates, on which it does lose money. If the government has to subsidize the lower rates, goes the argument, it could lead to cuts in the Pell grant program. The program is arguably more important for low-income students hoping to attend college because graduates do not have to repay Pell grants.

We consider that a false choice. Given the importance of higher education to the economy, its ability to help hard-working student escape poverty, and the need to improve the capability of the United States to compete globally, Congress needs to provide more Pell grants while keeping Stafford interest rates low.

Yes, a growing federal deficit is a major challenge the nation must address through reform of entitlement programs and prudent adjustments in the growth of defense spending. But making it more difficult for students to attend college, and harder for those who do graduate to becomeself-sufficient, is counterproductive and the wrong way to cut spending.

The bigger issue is the nation’s overall approach to higher education. At a time when incomes are stagnant and in many cases declining, universities, both public and private, increase tuition rates almost annually, and often far in excess of inflation. Those who can manage to scrape together the loans to afford tuition face years of repaying it. President Obama hinted in his last State of the Union address that his administration would no longer tolerate unjustified increases in higher education costs. We await details.

For a nation in which there is supposedly a bipartisan consensus about the importance of boosting college educate rates, it certainly has a strange way to go about it. Preventing interest rates on Stafford loans fromdoubling is one small way to at least not make matters worse.