Student loans face congressional brinksmanship

(CBS News) WASHINGTON, D.C. - On Capitol Hill, the House and Senate have until next Saturday to fund transportation projects for another year, and to renew low student loan rates. A dispute over how to pay for those low rates is keeping the two sides apart.

Like one-third of all college students, Sam Nelson, a junior at George Washington University uses federal Stafford loans to help pay his tuition.

"My greatest concern is that it'll expire because Congress is just sitting around and it'll keep going up and keep going up," Nelson said.

If Congress doesn't act by July 1st, the current low rate of 3.4 percent will double to 6.8 percent for 7 million new borrowers, costing them an average of $1,000 extra over the life of the loan.

"This issue didn't come out of nowhere; it's been looming for months. But we've been stuck watching Congress play chicken with another deadline," President Obama said.

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Democrats and Republicans have been feuding over how to find the $6 billion needed to keep the rates low for one more year.

"The implication is that Republicans are the ones dragging their feet. As for the president, well this is just another sad example of the election-year strategy of deflection and distraction," said Senate Minority Leader Mitch McConnell.

A Republican proposal to take the money from a preventive health care fund got shot down by Democrats. But a Democratic proposal to get the funds by closing a corporate tax loophole also went nowhere.

Still, congressional scholar Sarah Binder with the Brookings Institute predicts the two sides will work this out.

"Both parties agree that they don't want to see an increase in rates, loan rates, particularly right before an election season where students are going to be a vote up for grabs for both parties. It really has finally forced the two parties to say, 'Let's sit down, let's find a way to pay for this,'" Binder said.

The election year pressure may be taking hold. Negotiators have been working through the weekend. On Sunday, at least, some are projecting more confidence that they can reach a deal.

[hillzhavays]

"If Congress doesn't act by July 1st, the current low rate of 3.4 percent will double to 6.8 percent for 7 million new borrowers, costing them an average of $1,000 extra over the life of the loan."
_____________________________________

Are you kidding me? An extra grand over the course 12 to 30 years. That's it?

What a ridiculous non-issue for lefties to get all worked up over. Anyone who's upset about this is just making a mountain out of a mole-hill, just like the contraception smokescreen, just like the tax the rich bogus argument, it's all just a bunch of fluff and rhetoric.

[frank_farmer]

Very kindly, you missed on the math. Next sentence says that Dems and GOP are feuding over how to find the $6 *Billion* (in taxpayer money) to enable (subsidize) the low rates for another year. The initial passage of Stafford got votes - and every episode of interest rate adjustments and credit limits from then on is another chance to trade candy for votes. Just one more way of many that the feds are everybody's sugar-daddy while running the big-business of big government.

[hillzhavays]

It's not my math Frank - that a paragraph from the article - specifically paragraph 4.

[Outspoken-1]

McConnell is an ass. Everytime I hear this guy talk nothing but **** comes out, this guy is full of so much bitterness he can't even smile. I think if he tried his face would probably crack. I think he knows this too that's why he keeps that pucker puss expression on his face all of the time. This guy is so consumed with carrying out his personal vendetta against the President that he doesn't give a damn about dragging the country down in the process. Him and his b buddy Boehner are the ones keeping us mired down in this bog their buddy GWB got us stuck in. Feed em some GM grass milkshakes and let this country get on with getting on. Is there really people out there voting for guys like this? Wow, and people wonder why we've got the problems that we do. Talk about shooting yourself in the foot.

[JWinATL]

I don't understand why the American people should have to subsidize everyone else's living expenses and lifestyle choices. I went to junior college, got training, and worked 40 hours a week. I went back to get a degree by achieving scholarships and taking a small courseload. It took me 19 years to finally get my degree (including the time I went to J/C), but I did it DEBT FREE. So many kids are getting degrees in courses of study with zero career options, and then screaming about not being able to find a job. Also, $1,000 over the life of the loan? Someone else said here that if you sign the loan documents, you agree to pay by the terms. You got a break for a while. Good for you. Suck it up and pay as agreed.

[omnibus66]

Part of the Repug plan to dumb down America. They know that the higher the education level, the less likely to vote for the pugs (or watch Fake News). On the other hand, closing corporate tax loopholes means lower campaign contributions from their masters.

[hillzhavays]

It also means less hiring. No one has explained to me how raising taxes on business encourages hiring. But it sounds like you have a lot of answers, so maybe you can.

[kegaket]

Very bad reporting. This article doesn't even mention the most important thing - what is the cost to the provider of these funds - 6.8%, 3.4% or something else? If it's 6.8%, then that extra $1,000 will eventually be paid by these kids anyway, whether in the form of interest or taxes. The least painful lending rate for these young people would actually be at cost, whatever that % is.

[frank_farmer]

The BIG question is WHY was this "entitlement" ever provided by the government in the first place ? It's all about handing out candy to get votes. And now this faux controversy of good cop bad cop with the interest rates on that candy. Both parties are bad guys playing this game.

Handing out candy weakens the society's social fabric while increasing dependency, all while causing a giant tuition cost bubble from the resulting rent-seeking by the schools.

Just say no to student debt; finish your first 2 years at a low-buck junior college; then look into best in class cost bargains to finish the final 2 years.

Debt has its place for graduate school specializations like medicine and law -- but finishing at the BS degree level with significant debt is ridiculous and irresponsible. Don't be a lemming.

[jstaro]

So your 'candy' theory must cover soldiers sent into wars of choice and then join us in the veterans ranks, not to mention All that You get, and use or is done for You, in return for what You contribute!!

No Revenues {nor private capital economic investments, free market capitalism} = No Sacrifice = No Support = DeJa-Vu all over again!. Now a decade and counting, told to go shopping, added to the previous decades of under funding the VA, while the peoples reps Still try and lay blame on the Agency, after rubber stamping wars and costs of and those represented cheer on these wars!

While the wealthy and other investors garner their booty, still, from both and many have the chutz-pa to call themselves more patriotic{?} then others wrapped in those false flags, using false slogans and various cheap symbols of and then seek one day events or parades to wave all that patriotism, call it "Supporting the Troops", then go home and either ignore or forget about those that actually sacrificed for the country!

USN '67-'71 All Shore GMG3 Vietnam In Country '70-'71

[frank_farmer]

@jstaro - if indeed the world stops and the people are powerless until our government makes the first / second / third and fourth move on their economic behalf FIRST, then we might as well put a Russian Flag on top of the White House and be done with it. Grow up.

A clean text substitution of your military references in your post for the grievance mongering of other special interest groups (e.g. funded abortion, LGBT, fannie / freddie, etc) could readily be done. Rent seeking - all of it.

And this is why we need to bring back the draft: to stop whiners like @jstaro from implicitly asserting that society's "privileged" mostly do not wear the uniform or serve - that instead it's mostly lower-income folks who do so out of financial necessity, so that they're purportedly being exploited by the country at large and so deserve a lifetime subscription to the gravy train.

Mind you, I'm not against the merits of the GI Bill. But conversely, once the candy shop is opened for business, at what point does the door get closed and the line get drawn ? The answer is, as the decades go by, that there are no lines or limits. Just more and more politically-driven promotions for votes by handing out more and more candy. More drama, more money, more votes: in perpetuity.

Eisenhower's warning against the military industrial complex does not apply only to corporations. The assertion in my initial post is simply "DON'T OPEN THE DOOR IN THE FIRST PLACE." Because there will ALWAYS be somebody who "deserves more" than what's been handed out up to now.

Communities and families should mostly provide charity and opportunity -- not the feds. Finally, in my initial post, I was thinking of the runny-nosed suburban kid with the innate sense of entitlement because her (and her parents') college plans assumes the availability of US government-backed debt from day one - and at the same time so do the cash-thirsty colleges gaming the system.

[rwsmith29456]

DOUBLING the present interest rate is ridiculous. Be reasonable.

[aintfakin]

freeamerica31 June 25, 2012 12:08 AM EDT
Shouldn't have to cut anything...pay the costs of borrowing the money for your education or get a job, save your money, and pay for it outright.

you havent looked at the cost of a college education which makes me think you dont have one. Why should the interest rate be anymore than a mortgage given in the free market?
but i understand
you are a disciple of the "ignorance is cool" theory of Sara Falin.

[aintfakin]

so lets see
health care vs a corporate tax loophole
the latest in a gazillion screaming admissions by the republicans that they don't give a rat's patootie about this country
no education for you (republicans are the school soup nazis)
if you ain't rich just scrub the floors and shut up. The door is closing fast in the land of opportunity. The republicans have theirs and they are going to slam it behind them.
if you aint a millionaire you have to be a super sized sucker to join the republican party

[freeamerica31]

Shouldn't have to cut anything...pay the costs of borrowing the money for your education or get a job, save your money, and pay for it outright.

[sidnitra11]

I don't recall forcibly being made to sign to be thousands of dollars in debt, but my less than privileged lifestyle only left me two choices. Either be disenrolled from my classes bc of my families inability to keep up with consistently rising tuition, or be in debt to various student loans for the opportunity to better mine and my families lives through an exceptional education. I'm not saying that I want to be let off scot-free with my loans. No. I did sign up for this. But don't fluctuate interest rates whenever you feel it convenient.

It's pretty much a catch-22. Only those who can afford to go to college (affluent people, or really, really smart people through full rides) while it looks like everyone else will be confined to menial labor jobs, just to get by, because they couldn't afford a decent education. And don't give me that crap about trade schools, jr. colleges, joining the military and what not, because everyone doesn't want to do a trade, and some people still need loans for jr. college and the military ain't for everybody!

Also, there is no need for me to be "un-weaned" from my parents because they have nothing for me to be weaned off from. With scholarships AND student loans I made it through undergrad. I didn't want to take the student loans but it was necessary for me to continue my education. And I say again, I appreciate the governments help, truly, but work with us students. Stop jacking up interests rates and making it virtually impossible to pay off debt.