Sunday, April 20, 2014
YOLO COUNTY NEWS
99 CENTS

Student loan rate set to rise, despite lack of support

By Tamar Lewin

The interest rate on many student loans is scheduled to double on July 1, to 6.8 percent from 3.4 percent — just as it was last year, when in the midst of an election campaign, Congress voted to extend the lower rate.

Again this year, no one wants the increase to happen, especially since even the current rate is well above market. But once again, there is likely to be a good deal of brinkmanship before the issue is settled. This time around, though, longer-term solutions may be on the horizon.

On Tuesday, the day before the White House plans to send its budget to Congress, student advocacy groups released an issue brief charging that the federal government should not be profiting from student loans, while more and more students bear a crushing debt burden.

The brief, citing a February report from the Congressional Budget Office, said the federal government makes 36 cents in profit on every student-loan dollar it puts out, and estimates that overall, student loans will bring in $34 billion next year.

“Higher education loans are meant to subsidize the cost of higher education, not profit from them, especially at a time when students are facing record debt,” said Ethan Senack, the higher education advocate at the U.S. Public Interest Research Group, which is issuing the brief with the United States Student Association and Young Invincibles, an organization for people 18 to 34.

“The revenue from student loans should be used to keep education affordable, and should never be used to pay down the deficit or for other federal programs,” Senack said.

While it has long been known that the government makes money on student loans, the numbers in the issue brief are surprising, said Terry Hartle, senior vice president of the American Council on Education.

“If the numbers are accurate, the government will make more money on student loans than Ford makes on automobiles,” he said. “Using student loans to create a profit center is not what anybody intended.”

Student loan borrowers graduate with an average debt of $27,000, and the scheduled interest rate increase on subsidized Stafford loans would cost almost 10 million borrowers about $1,000 more over the life of their loan, for each year of college.

According to the CBO report, the government will get 12.5 cents in revenue next year for every dollar lent through subsidized Staffords, 33.3 cents per dollar in unsubsidized Staffords, 54.8 cents on each dollar of graduate school loans, and 49 cents per dollar of parent loans, for a total of $34 billion a year.

Borrowers of subsidized Stafford loans make up more than a third of those using federal student aid. More than two-thirds of those borrowers are from families with an annual income under $50,000. Last April, in his re-election campaign, President Obama made a central issue of stopping the Stafford interest rate increase. A few days later, Mitt Romney expressed a similar view.

Now that the lower rate is about to expire, there is general agreement that it should not double. But a solution is unclear.

The White House budget is widely expected to include a proposal to move to a variable interest rate, pegged to the government’s cost of borrowing, that would be reset every year.

“The president’s plan will help middle-class students and their families afford college by stopping interest rates from doubling on July 1 as part of a long-term solution that is fair, fiscally responsible and benefits more borrowers by offering lower interest rates on nearly all federal student loans next year,” said an administration official, who declined to provide details of the plan.

Many Republicans favor a variable interest rate. But the Senate recently passed a budget resolution extending the 3.4 percent rate indefinitely, and Rep. Joe Courtney, D-Conn., said he planned to introduce legislation this week extending the 3.4 rate for two years, to give Congress time to rethink student loan interest rates as part of the higher education reauthorization bill.

“We have this very fragmented loan system, with subsidized loans and nonsubsidized loans and graduate students who may not qualify for anything,” Courtney said, “and we need some kind of long-term proposal that isn’t a one-year fix, but would use the low cost of money now as a sweetener.”

New York Times News Service

LEAVE A COMMENT

Discussion | No comments

The Davis Enterprise does not necessarily condone the comments here, nor does it review every post. Read our full policy

.

News

A springtime ritual

By Wayne Tilcock | From Page: A1 | Gallery

 
Tom Adams seeks Davis school board seat

By Jeff Hudson | From Page: A1

 
Hub of activity: DHS newspaper keeps evolving

By Zoe Juanitas | From Page: A1 | Gallery

Holy fire ceremony draws thousands in Jerusalem

By The Associated Press | From Page: A2 | Gallery

 
Tour renovated YCCC facility Thursday

By Enterprise staff | From Page: A3

 
Tour Davis Waldorf School on Wednesday

By Enterprise staff | From Page: A3

The fifth annual Tour de Cluck is soon to be hatched

By Special to The Enterprise | From Page: A3 | Gallery

 
Ortiz lawn signs available

By Enterprise staff | From Page: A3

Sign up soon for spring cooking classes

By Enterprise staff | From Page: A3

 
Robb Davis team to rally on Saturday

By Enterprise staff | From Page: A3

Steadfast in their support

By Lauren Keene | From Page: A4, 7 Comments | Gallery

 
Yolo Hospice offers free grief workshops

By Enterprise staff | From Page: A4

Sign up for Camp Kesem caterpillar crawl

By Enterprise staff | From Page: A4

 
Quilters gear up for annual show

By Sebastian Onate | From Page: A4

KDVS launches fund drive on Monday

By Jeff Hudson | From Page: A5

 
Calling all Scrabble fans

By Enterprise staff | From Page: A5, 1 Comment | Gallery

League hosts a series of candidate forums

By Enterprise staff | From Page: A5

 
Hub webpage is seeing traffic increasing

By Zoe Juanitas | From Page: A8

Preschool open house set at Davis Waldorf

By Enterprise staff | From Page: A16

 
Birch Lane celebrates its 50th anniversary

By Enterprise staff | From Page: A16

Hotel/conference center info meeting set

By Enterprise staff | From Page: A16

 
Lescroart welcomes all to book-launch party

By Special to The Enterprise | From Page: A16 | Gallery

DEVO set to serve up 14th annual Winkler Dinner

By Enterprise staff | From Page: A16 | Gallery

 
Learn Chinese crafts at I-House

By Sebastian Onate | From Page: A16

.

Forum

Take ownership of your health

By Special to The Enterprise | From Page: B5

 
Not thrilled with lack of symmetry

By Special to The Enterprise | From Page: A7

Reliving the agony and ecstasy of spring

By Marion Franck | From Page: A7

 
Keep your baby safe

By Special to The Enterprise | From Page: A7

 
Core values on campus

By Our View | From Page: A12, 1 Comment

Road diet? No, city diet!

By Letters to the Editor | From Page: A12, 5 Comments

 
We’re reveling in our equality

By Letters to the Editor | From Page: A12, 1 Comment

Vote no; it’s fiscally responsible

By Letters to the Editor | From Page: A12, 2 Comments

 
Rick McKee cartoon

By Debbie Davis | From Page: A12

 
Bill is an affront to UC Davis ag biotech and local farmers

By Special to The Enterprise | From Page: A13, 1 Comment

Don’t want to sit in Fix 50 traffic? Consider alternatives

By Special to The Enterprise | From Page: A13, 1 Comment

 
.

Sports

Devils burn up the track

By Enterprise staff | From Page: B1

 
UCD softball shut out by Santa Barbara

By Thomas Oide | From Page: B1 | Gallery

 
Aggie men shoot 9-under, lead own tourney

By Bruce Gallaudet | From Page: B1 | Gallery

Stars shine in Woody Wilson Classic

By Evan Ream | From Page: B1, 1 Comment | Gallery

 
UCD roundup: Aggie baseball swept away by Highlanders

By Enterprise staff | From Page: B2

A’s score 3 in ninth, rally past Astros 4-3

By The Associated Press | From Page: B6

 
.

Features

.

Arts

.

Business

Yolo Federal Credit Union gets WISH funds

By Enterprise staff | From Page: A9

 
PG&E pays taxes, fees to county, cities

By Enterprise staff | From Page: A9, 1 Comment

Will Davis get an Old Soul?

By Wendy Weitzel | From Page: A9

 
Pediatricians, nurse practitioner hired at Woodland Healthcare

By Enterprise staff | From Page: A9 | Gallery

Asian stocks mostly higher after mixed U.S. earnings

By The Associated Press | From Page: A9

 
Davis Roots will showcase its graduating startups

By Enterprise staff | From Page: A14

University Honda wins another President’s Award

By Enterprise staff | From Page: A14 | Gallery

 
Dutch Bros. raises $19,000 for girl with leukemia

By Enterprise staff | From Page: A14 | Gallery

.

Obituaries

.

Comics

Comics: Sunday, April 20, 2014

By Creator | From Page: B8