Student Loan Rates Go From Bad to So What

By
David Hawkings
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Next Tuesday has already been established as a critical date in the House, because it’s when Republicans will meet to decide their next move in the immigration debate. But July 10 also looms as a big day in the Senate, because that’s when a pair of roll calls will decide whether the student loan impasse will be broken before it becomes a potentially expensive hassle for millions.

It’s much more difficult than usual to predict the ultimate outcome, given the unusual legislative dynamics behind the standoff.

The normally united caucus of Democratic senators has split over what to do next, while the Republicans are sounding much more interested than most Democrats in pursuing something similar to what President Barack Obama wants. And the House, which has spent all year deferring to the Senate because of all the division within the GOP majority, has taken the lead in the matter by passing a plan to revamp the whole system, doing so with almost unanimous Republican support.

It’s also tougher than usual to forecast when the issue will be resolved, given that Congress has just ignored the statutory deadline with almost no outward care about the consequences.

Congress went home this week without preventing the scheduled doubling of interest rates on newly issued subsidized Stafford loans. So on Monday, the cost of borrowing for college that way skyrocketed — at least on paper — to 6.8 percent from the 3.4 percent it’s been fixed at for four years.

For about 7 million students and families who take out these loans every year, that means the theoretical debt burden after graduation has gone up by at least $1,000 and maybe as much as $2,600. (The range has mainly to do with varying estimates about the size of the typical loan.) Given that Americans already owe more on education loans than on either credit cards or car payments, passively permitting the cost of a college education to rise looks to create significant economic consequences down the road.

It would also stand to have significant political consequences very soon. But, so far, not so much. There are three reasons for this lack of urgency.

(story continues in Roll Call)

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