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President Obama to discuss student loan rate increase
Interest rates on federal student loans are set to double on July 1. The president is urging Congress to stop that increase.
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Kai Ryssdal:President Obama's doing the college tour next week. No, not that kind of college tour -- I think his kids are still a little young for that.
This one's a swing through three states that'll get a whole lot of attention in the campaign this fall. The president will be talking student loans at universities in North Carolina, Colorado and Iowa. Interest rates on new federal student loans are set to double July 1.
Marketplace's Sarah Gardner has more.
Sarah Gardner: The law that cut interest rates on federal student loans five years ago is set to expire this summer. And if Congress does nothing, the rate jumps from 3.4 percent to 6.8. When mortage and other consumer loans are bargain-basement low.
Financial aid expert Mark Kantrowitz says remember: it costs the government billions a year to subsidize student loans. And besides, they’re riskier.
Mark Kantrowitz: If you default on a home equity loan, the lender can foreclose upon your home. If you default on a student loan, the government can’t repossess your education.
That’s no doubt cold comfort to the millions of low- and middle-income students who depend on so-called “Stafford Loans” every year.
Rich Williams is the higher education advocate for U.S. PIRG.
Rich Williams: As we’re trying to find ways to recover from the economic slump we’re in, we want to present every green light possible to students and Americans to go to school, to get the training that will make them competitive in the Marketplace.
But Mark Kantrowitz says it’s not the interest rate on student loans that dissuades kids from going to college.
Kantrowitz: What matters with regard to whether someone enrolls in college is how much money can they get and when do they have to start paying it back.
But with student debt levels at nearly a trillion dollars, education experts agree higher interest rates will hurt students after graduation. Already there’s evidence that rising student debt means many young people are putting off major economic decisions: everything from buying houses to having babies.
I’m Sarah Gardner for Marketplace.
The double Interest rate on a student loan is not good for poor parents as well as middle income family people. Students love Obama yet why has he increased interest rate . After reading the entire story, I am not happy with decision of American Governance.
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I find it strange how people think of this as doubling the interest rate, instead of having it return to sustainable levels. Given the amount of student loan defaulting (and other problems) which is going on, I find it difficult to defend something which is intended to increase the amount of student loans.
Just like the housing bubble, artificially cheap credit and loose standards has created a bubble in prices. We need to recognize that one of the largest reasons for sky high college costs is BECAUSE of the cheap lending associated with it. We need to let the market set the price, only then will we have the appropriate number of people in school. We have too many people effectively financing their living expenses in their 20's while they study nonsense. Jobs that used to be done perfectly adequately by people without a degree now require a degree because so many people have them, not because it's necessary to learn and do the job.
We need those people out in the labor force making things we can export to our foreign creditors. Tieing up all this labor in school and the wars creates a shortage of labor and makes our wages higher than most of the rest of the world, this means jobs leave our shores.
I suppose I don't fully understand my student loans. I was under the impression that I couldn't default. That if I refuse to pay, the government could withhold my tax returns, garnish wages, and penalize my social security. So even though the government couldn't foreclose on my education, they had plenty of tools to get back that money. Making a student loan much safer than a home loan, mortgage, or car loan. If all that's not true, then I guess its unfair for me to accuse the raise in student loan interest rates as nothing more than a bizarre gimmick of the government to double tax students. Hit them hard now while they are in debt, then hit them again once they get a higher paying job from that education.
