Political Pressure Builds as Student-Loan Deadline Nears

Excerpt from Caralee J. Adams' article.

Deadline Looms

The saga of student loans can be traced back to the College Cost Reduction and Access Act of 2007. Congress agreed to phase in lower rates on subsidized Stafford Loans to 3.4 percent by 2011-12, but then have them revert to 6.8 percent for the 2012-13 academic year.

The loans are awarded on the basis of financial need. The maximum amount a dependent undergraduate student can take out in subsidized loans is $23,000. The lifetime limit for an independent undergraduate is $65,000.

“Congress only acts when there is a perceived crisis,” said Stephen Burd, a senior policy analyst with Education Sector, a nonprofit think tank in Washington. “It’s an easy issue for people to understand. I’m not surprised with the attention. But it is amazing to see how quickly Republicans caved.”

Earlier this year, the budget proposed by U.S. Rep. Paul Ryan, R-Wis., the chairman of the House Budget Committee, contained no changes in loan-interest rates.

“Politicians pay attention to the polls,” said David Hawkins, the director of public policy and research for the National Association for College Admission Counseling, or NACAC. “Obviously, the student-loan issue has polled off the charts; otherwise, we would not have both parties floating bills.”

Attention to student debt by the Occupy Movement and lawmakers in campaign mode also has fueled the debate, said Neal McCluskey, the associate director for the Center for Educational Freedom at the Cato Institute, a think tank in Washington with a free-market orientation.

“Nobody wants to go on record, especially now, as a person who would double interest rates on students,” said Mr. McCluskey. He added that Republicans generally are not against student aid, but want to find a responsible way to pay for it.

Jim Miller, a former president of NACAC and the coordinator of enrollment services at the University of Wisconsin-Superior, said it would be politically difficult for Congress not to lower the rates.

“Student financial aid has always been a way that policy has tried to recognize the shared benefit and responsibility to go to college. It has a personal benefit and a public one,” he said.

While there is a groundswell of support for lower interest rates, some in higher education circles contend that this is a relatively small issue on which to use up political capital, without having much direct impact on college access.

Priority Level

Matthew M. Chingos, a fellow at the Brookings Institution, a Washington think tank, argues that since blocking the interest-rate increase would only affect interest rates after students leave college, it wouldn’t provide relief for current students struggling to afford college. He suggests it would be better to put more federal money into grants to benefit students immediately and decrease the cost of attending college, rather than a give a subsidy down the road.

Mr. McCluskey of Cato agrees there is too much attention being spent on a minor issue that fixes the problem only for one year. “What they need to do is rethink the whole idea of the federal government providing aid for students going to college,” he said. “Aid is what drives ridiculous college cost inflation.”

Mr. McCluskey contends that cheap access to college aid is leading to an overconsumption of higher education, pushing too many students into college who are unprepared, can’t afford it, and do not finish.

Mr. Burd, of Education Sector, said that while it’s admirable that lawmakers want to help student borrowers, there are more far-reaching issues that should be addressed, such as helping borrowers who are dealing with unmanageable debt and stuck in default.

“It’s a good sign that the administration and Congress are concerned about student debt,” he said. “I hope that we can build on this, but I worry that people will say this solves the student debt problem...”