Between Sen. Elizabeth Warren (D-MA) 23% and President Obama, the left has made some pretty solid efforts to ensure college tuition remains on the rise, even if that is not their intention.
President Obama signed a memorandum Monday to extend the “Pay as You Earn” program to 5 million previously ineligible borrowers who took out student loans prior to 2007. While that may seem like a good move politically, it will harm students and taxpayers in the long run because it fails to get at the root cause of rising college tuition costs.
Current student loan policy already affords students generous options for financing their education and paying off their loans, but it puts no downward pressure on the cost of college tuition. The “Pay as You Earn” program caps what students can be required to pay to just 10 percent of discretionary income, and forgiveness begins after just 20 years (10 for those in “public service).
Is Congress serious about making college more affordable and increasing access to college for more students?
Historically, their efforts to do so have failed, which is why “approximately 60 percent of students who earned a bachelor’s degree during the 2011-12 academic year left school more than $26,000 in debt.”
Fortunately, the Heritage Foundation’s Lindsey M. Burke has real solutions to this problem, which she discussed in a testimony before the Senate Banking, Housing, and Urban Affairs subcommittee on Financial Institutions and Consumer Protection. Watch the testimony below.
Burke said, “earning a college degree is the way to climb the ladder of economic mobility,” which is why she has dedicated serious research to ensuring those who go to college can afford to do so without being burdened by such great debt upon graduation. She stated:
The value of earning a college degree is demonstrable. The cost of earning that degree, however, has become prohibitively expensive for many as college costs have risen. Average tuition at four-year public institutions for out-of-state students reached $22,200 this academic year, and at private universities, average tuition now exceeds $30,000 annually.
In order to change that phenomenon, Burke explains:
In order to make college more affordable, federal policy should do three things:
1. Stop the higher education spending spree;
2. Employ fair-value accounting to understand the cost of federal student loans; and
3. Decouple federal financing from accreditation
All too often, politicians in Washington are more concerned with playing games than with doing what is best for the American people. The debate surrounding student loans is no exception, as Senate Democrats and Republicans bicker over two student loan proposals that are both bad. This emotionally charged debate is under the guise of fighting for affordable education for students – though there is scant mention of the cost to taxpayers.
There are two proposals being considered in the Senate that would pose an unknown cost on taxpayers. Without fair value accounting mechanisms in place (the Congressional Budget Office does not use it), it is impossible to ascertain how much these rates will cost taxpayers. Moreover, if we enter into another recession, Congress will once again find itself under pressure to repeat the same mistakes as before and artificially subsidize these rates.
Though tensions have been escalating, Sen. Harry Reid (D-NV) pushed forward the Democratic bill designed to keep rates at 3.4 percent for subsidized student loans, applying the rate to any loans made between July 1, 2013 and June 30, 2014. The bill will face its first procedural hurdle on Wednesday, needing at 60 votes to advance.
Sens. Joe Manchin (D-WV), Richard Burr (R-NC), and Tom Coburn (R-OK) have offered a bipartisan bill (S. 1241) that pegs the interest rate at 10 year Treasury note plus 1.85 percent for Stafford loans, pegs the interest rate at 10 year Treasury note plus 3.45 percent for Graduate loans, and puts a cap on the rates at 8.25 percent.
OBAMACARE. President Obama’s healthcare law has long been strongly opposed by the right, but as we approach 2014, it is proving to be a huge problem for the left, especially Health and Human Services secretary Kathleen Sebelius:
Over the next several months, Sebelius and her team must finalize controversial regulations, educate the public and deal with a restive Congress watching her every move. By all accounts, it’s an enormous challenge — especially with the hurdles confronting the administration.
Red states continue to balk at the new law. Regulators are pleading for more implementation funds. Unions are in an uproar. And polls show the public remains largely ignorant of the law’s benefits.
Senate Finance Committee Chairman Max Baucus (D-Mont.), who helped write ObamaCare, recently told Sebelius he worries its implementation will be a “train wreck.”
Sebelius has adopted a measured approach with Congress, preferring not to engage in verbal combat with her opponents. She has expressed frustration with the never-ending politics surrounding ObamaCare, even after the Supreme Court ruling upholding the law and Obama’s reelection.
Earlier this month, Sebelius was put on the defensive when news broke that she solicited money for Enroll America, a non-profit that will educate consumers about healthcare reform, from powerful healthcare interests.
STUDENT LOANS. For Congress, the best solution on student loans would be to work toward getting the government out of the student loan industry all together. This would prevent taxpayers from being on the hook for student loans that are never repaid. Nonetheless, they are considering options that would keep the federal government involved to varying degrees to determine student loan interest rates (sub. req’d):
Another partisan fight over federal student loan interest rates looms on the House floor today as Republicans try to shift the program to a market-based approach. The GOP bill was based on a proposal in Obama’s fiscal 2014 budget request to peg interest rates to 10-year Treasuries. The key distinction is the bill would allow rates to fluctuate with the market and be reset each year. Democrats want to eliminate some uncertainty by setting rates on the Treasury’s actual cost of borrowing and then fixing them for the life of the loan. In its veto threat, the White House said the bill would burden students from lower-income families with potentially onerous rate increases. Critics have also noted the legislation lacks Obama’s proposal to extend repayment options to borrowers who have already left school. Even if the bill makes it out of the House, its prospects are grim in the Democratic Senate, which could adopt a plan (S 953) to simply extend the current 3.4-percent rate or to address rates as part of a reauthorization the Higher Education Act.