Student loans. Anyone who has watched the news recently probably has an opinion on them. A colleague of mine wrote an article on this topic titled: "Student Loan Debt" in which she stated: "If Obama isn't wiling to let this bill pass, he needs to work on another solution to help students be able to attend college." She is referring to the The College Cost Reduction and Access Act which lowered interest rates on student loans to 3.4%, and is set to expire June 1st. President Obama has really emphasized the issue recently, and my colleague would like him to take action to keep the interest rates low. However, I would contend that president Obama has blown this issue out of proportion simply to get more votes.
First of all, the change is not nearly as dramatic as President Obama would like you to think. If we examine the text of the law (The College Cost Reduction and Access Act), we see in Title II, section 201, subsection [a], in parts [A], [B], [C], [D], and [E], that the interests rates were reduced gradually--from 6.8% to 6.0% to 5.6% to 4.5% to 3.4%. Meaning that the 3.4% interest rate only came into effect in July 2011! A 3.4% interest rate has not been the norm over the past several years--as Obama would like you to think--instead, it's only been in affect for less than a year. College students are by no means unaccustomed to rates higher than 3.4%.
First of all, the change is not nearly as dramatic as President Obama would like you to think. If we examine the text of the law (The College Cost Reduction and Access Act), we see in Title II, section 201, subsection [a], in parts [A], [B], [C], [D], and [E], that the interests rates were reduced gradually--from 6.8% to 6.0% to 5.6% to 4.5% to 3.4%. Meaning that the 3.4% interest rate only came into effect in July 2011! A 3.4% interest rate has not been the norm over the past several years--as Obama would like you to think--instead, it's only been in affect for less than a year. College students are by no means unaccustomed to rates higher than 3.4%.
Second, these interest rate changes aren't very widespread. The president would like you to believe that rates on all student loans are increasing, but this is simply not true. Douglas Holtz-Eakin made a good point on National Review's Corner blog when he wrote:
"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."
Considering there are 39 million Americans with student loans, as Holtz-Eakin's article states, President Obama's argument suddenly seems so much less significant. This change would not affect most college students.
Third, President Obama is emphasizing this issue only to get votes, not because he actually cares. If we examine when the bill was first passed, we see an entirely different story than what Obama is saying now. Politico published an article on April 12 titled: "As Senator, Obama Missed Votes on Student Loan Bill he Now Wants to Extend." The author of the article (Byron Tau) points out that Obama skipped the Senate vote on this bill twice. Tau says: "Obama has made keeping student loan interest rates low a new priority for his administration — but as a senator, he neither voted for Miller's bill nor signed on as a cosponsor." It's clear this bill was not a priority--until election time. Only when his reelection is at stake does Obama address this bill, and when he does, he blows it way out of proportion.
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