As you may have heard, 8 Senators have come to an agreement on student loan rates that is blessed by the White House. On July 1, thanks to our dysfunctional (nonfunctional?) political system, the interest rates for student borrowers jumped to an absurd 6.8%. The White House immediately pressed for a system that would tie student loan interest rates to what the government pays to borrow money. As with much of his education agenda, this was a terrible idea from the Obama Administration and basically ceded ground to the Republicans. Senate Democrats were angry and initially rejected such an idea, but what could they really do in the end? The typical college undergraduate borrowing $27,000 (which is an insane amount of money right there) will pay an extra $300 in interest under this system.
Some Democrats such as Diana Carew at the Progressive Policy Institute are calling this a “reasonable compromise.” I don’t really see it that way. Carew is right that relatively small changes in interest rates is not the biggest driver of student debt. Yet the interest rate on student loans should be 0.0%. That should be the progressive policy position. Republicans and some Democrats have talked of the extra revenue raised by the rise in student loan rates. The government should receive absolutely no profit from the student loan system.
This is one of those small victories for Republicans that add up to make our lives worse and worse, one day at a time.