The Student Loan Side Show
Updated at 2:30 pm EDT
Since he has no serious ideas – big or small – to get our economy moving (aside from massive tax hikes and total government control), President Obama is touring the country to campaign for his latest policy gimmick. He has a habit of saying things that sound good in a speech but offer no real help to those suffering under his policies of the past 3 years.
His latest “must pass” idea is to stop the interest rate on student loans from doubling. On July 1, the interest rate on Stafford loans will double from 3.4% to 6.8%. It sounds terrible and makes for a great anecdote in a campaign speech about helping students to more easily afford a college education. To counter this increase, President Obama is calling on Congress to pass an extension of a 2007 law that cut the student loan interest rate, keeping loans artificially low and allowing colleges to increase tuition costs since it was “cheaper” for students to get loans to attend.
Extending interest rates at these levels would cost $6 billion for a one year extension. To pay for it, Senate Democrats – predictably – suggest raising taxes on S corporations (i.e. small businesses) in order to make the bill anathema to Republicans and claim Republicans are for higher interest rates and against students attending college. Sen Mitch McConnell (R-KY), called out the left for this tactic:
“Let’s be honest. The only reason Democrats have proposed this particular solution to the problem is to get Republicans to oppose it, to make us cast a vote they think will make us look bad to the voters they need to win the next election.”
This is what our political system has become, propose a tiny tweak that will barely provide any relief for the small amount of people actually eligible for the help, and then berate opponents as being on the wrong side of an entire population. Douglas Holtz-Eakin with National Review breaks down exactly how little this policy does for students:
“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.”
Basically, the President is asking for Congress to appropriate $6 billion so that he can hand youth voters (who supported him in 2008 but are now understandably less enthusiastic) $7 checks each month. And with a new report saying that these days, 50% of college graduates are out of work, the President needs to give some “hope” to as many youth voters as he can.