With great fanfare, the president will embark on the #DontDoubleMyRate tour, “an effort to get Congress to prevent interest rates on student loans from doubling in July” according to the White House. For details see here.
Sounds serious. After all, there are 39 million Americans with student loans owing over a trillion dollars of debt, and interest rates doubling from 3.4 percent to 6.8 percent would be a huge hit at a time when households are already struggling.
Serious, except that the president’s plan would apply only to those 23 million loans being borrowed directly from the federal government. Except that not all of those would benefit; it would apply only to the 9.5 million loans being borrowed through the so-called subsidized Stafford loans. Except the lower rate would apply only to new borrowers who apply this year. Except that no payments are made until after graduation, so it would not help anyone for several years. Except that it would lower monthly payments by an average of only $7.
As a policy, the only thing that is serious is its inequities.
President Obama is demanding that Congress discriminate unfairly among the many borrowers trying to finance college education costs this year.
Worse, President Obama is also demanding that Congress discriminate unfairly against those borrowing next year and beyond. Extending the 3.4 percent rate costs $6 billion for a temporary one-year extension. Congress cannot afford to and will not extend the rates past this year.
Maybe these inequities would be tolerable if they enabled immediate relief of some pressing burden. Instead, what is at stake is a bit more than $5 a month when repayment starts after graduation.
The #DontDoubleMyRate tour is really the #LetsCampaignOnHandingOut$5BillsDuringMy2ndTerm tour.
The White House asserts that Obama “believes we must reward hard work and responsibility by keeping interest rates on student loans low so more Americans get a fair shot at an affordable college education, the skills they need to find a good job, and a clear path to middle class.”
Americans would have a better shot at an affordable college education in an economy that produced jobs and rapidly growing real income. Americans would be better able to afford college if their budgets were less pressured by gasoline, food, and health-insurance premiums. Americans would have a better path to the middle class if their future wasn’t threatened by federal debt already larger than the economy.
But the president is better served by empty policies selected for their political benefits.