Pelosi and pals hope to deliver on at least one of their pledges: reforming the federal student loan system by increasing government interference. The bill promises to:
Halve the interest rate on federally backed loans gradually over the next five years, to 3.4 percent from 6.8 percent, and would limit monthly payments to 15 percent of the borrower’s discretionary income.
It would also provide for complete forgiveness of federal student loans after 20 years for economic hardship.
This measure, however, will have little effect on the skyrocketing prices of college tuition. As economist Richard Vetter concluded, “college tuition increases follow student aid increases” because universities realize that prospective students can afford to pay more for their education.
This bill also fails to deliver on the Democratic promise to make college more accessible to lower-income students. Cutting interest rates and forgiving debt serve to benefit college graduates, not prospective students. The Republican proposal, which would aid lower-income families by increasing Pell Grants without relieving individuals of their responsibility to repay their loans, was rejected along partisan lines.
This bill does make one thing clear about the relationship between our government and higher education: there are not many Economics degrees in the House of Representatives.