We all know that the student loan debt for a college education is soaring. It’s at 1 trillion dollars now and is greater than the credit card debt!
College debt is a huge burden and not only limits access to equal educational opportunities, but it drags down our economy. Graduates with huge debt can not afford to buy homes and new cars or start families. That means their purchasing power is decreased, and general spending in the economy decreases along with that. College loan debt can not be limited by curtailing purchases or ripping up the credit card. It is there, set in stone with interest accruing. Student debt also can not be discharged through bankruptcy.
With all of this, the federal student loan interest rate is set to rise from 3.4 % to 6.8%. The Obama administration was able to pass legislation that took student loans out of the hands of private banks that were making huge profits the backs of students. Hence the government reduced loan rates for students to 3.4%. But the business of student loans is a risky investment. There is a large default rate on student loans. Also students can die or be sick and be unable to pay off their loans completely. With the deficit, the loan rates are set to go up.
Still, the government is making profit on student loans. It has earned over 50 billion dollars in profits. Those dollars are mostly put back into government such as into health care, again better than lining the pockets of private bankers, but does the loan rate have to go up to 6.8%–especially when the government now loans banks money for the extremely low interest rate of 0.75%!
The answer is NO. Legislators are working on several “fixes” to the increased interest rate. One plan is to make the rate 2.5% higher than the average loan rate and to cap it so it will not exceed 8.5%. Joseph Stiglitz, in a recent NYT op ed piece suggested making loan rates dependent on income level.
Whatever happens, education should be accessible and the student debt must be lowered for the sake of our social health and economic well-being.