Q & A with Dr. Lynn Reaser

Student Loan Rates—The Clock is Ticking

By: Dr. Lynn Reaser

Student loan rates on Stafford loans awarded to college students of low and middle income families could rise sharply in less than three months unless Congress takes action.  Under a law passed in 2007, interest rates were set at 3.4%, with those rates set to double to 6.8% at expiration of the law on July 1, 2012.  That date is now rapidly approaching.

The current debate over whether to extend the lower interest rates is set against an acrimonious scene on Capitol Hill, where arguments are raging on how to reduce the nation’s deficit.  A serious cost benefit analysis of various federal spending programs certainly is appropriate and $1 trillion deficits cannot be sustained.  Ways to contain the rapid rise in college costs also need to be explored.

A strong argument, however, can be made that this year’s estimated $6 billion cost of extending the lower borrowing rate is indeed a good investment in educating the next generation of American workers, especially compared to a total budget of $3.7 trillion.  The worst policy would be to double rates in less than three months, imposing hardship on students, families, and colleges throughout the country.


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