Home / Debt / The Federal Student Loan Rate Will Double on July 1. Democrats Are Horrified.
Print Friendly and PDF

The Federal Student Loan Rate Will Double on July 1. Democrats Are Horrified.

Written by Gary North on June 19, 2013

On July 1, the loan rate for student loans will double. This will reduce the number of students taking on this burden.

Democrats in Congress are deeply upset. They have published a report showing that the total student debt load has risen to almost $1 trillion. In this report, we read this warning.

The steady increase in student loan debt over the last decade has been driven by an increase in both the number of student borrowers and the average debt of those borrowers. Two-thirds of recent graduates have student loan debt. Those borrowers had an average balance of $27,200, which is 60% of the annualized average weekly earnings of young college graduates.

This sounds pretty bad. The Democrats think it is very bad. “The rising cost of higher education and increasing debt burdens for students pose a potential risk to graduates and the broader economy.” Their solution: keep loan rates subsidized. Keep them low.

Unless Congress acts, the interest rate on subsidized federal Stafford loans is set to double from 3.4% to 6.8% on July 1st. These loans accounted for over one-third of all student borrowing for the 2011-2012 academic year.

This will encourage students to borrow even more. But the Democrats reject such a notion. Here is what is needed.

• Keeping the interest rate on subsidized Stafford loans at the current level;
• Forgiving loan payments for certain graduates taking public interest jobs with lower pay;
• Restructuring loans based on financial hardship; and
• Converting private loans to federal loans to take advantage of programs already in place.

Don’t think of this as a government subsidy. Think of it as amnesty.  The goal is to get more students into debt. Then offer them amnesty if they work for the government.

Allowing borrowers with loans issued through the Federal Family Education Loan (FFEL) program and from private lenders to participate in the PSLF program could encourage more individuals with large student loan balances to pursue careers in public service, such as working for AmeriCorps or the Peace Corps or other non-profit organizations, particularly if they can also participate in an income-based repayment program.

The Teacher Loan Forgiveness program, which discharges up to $17,500 worth of Federal Direct or FFEL loans for graduates who teach full time in a low-income elementary or secondary school, could be similarly expanded to private loans to further encourage public service as a viable career path.

But then who pays off the loans? “No one.” But wouldn’t that add to the federal deficit? “Deficits don’t matter.”

So far, mean-spirited Republicans have refused to delay the hike in loan rates.

Libertarians would stop the Stafford student loan program. That is way too radical for Congress.

Continue Reading on www.jec.senate.gov

Print Friendly and PDF

Posting Policy:
We have no tolerance for comments containing violence, racism, vulgarity, profanity, all caps, or discourteous behavior. Thank you for partnering with us to maintain a courteous and useful public environment where we can engage in reasonable discourse. Read more.

5 thoughts on “The Federal Student Loan Rate Will Double on July 1. Democrats Are Horrified.

  1. See why these dummies can't get a job. If they are not smarter than this, they are no use to anybody. I feel like I can train a motivated High School grad to out perform these deadbeats. You really have to question their integrity. They borrowed the money and now don't want to pay it back… tantamount to stealing.
    How in the heck do they thik they can borrow for a car or a house if they don't repay their debts?
    What part of lower quartile performance is so hard to understand?

  2. I finished college with $22,000 in loans, which I consolidated at 9% interest (20 years ago), and guess what: I paid off every penny of it myself and by paying $100 a month more than the required payment, I paid it off a few years earlier than the contract. How did I do it? By working my butt off. Why did I do it? Because I believe in paying the debts I incur. Why should my debts be someone else's responsibility? I work in the Financial Aid Office of a major university and we have many students who openly state that they don't plan on paying off their loans. Yet we can't deny their loans because they are available to everyone. We do have to check their academic qualifications which allows us to avoid some repeat loans or it would be a much worse situation that the already horrendous situation that exists.

  3. What are the reasons college tuition has gone up so much faster than inflation?
    One reason could be that there are too many administrators. I've heard there are as many administrators as professors.
    Colleges and universities funded by the state or local governments should be forensically audited on a regular basis.

  4. yeh sure says:

    The main reason for rising prices is availability of credit, period. Buyers set prices, not sellers. Government loans have allowed too many fools to attend college when their time would have been better spent learning a trade. College is not for everyone and unless you work in certain industries, college is a complete waste of time and money. As the debt Ponzi collapses this truth will become increasingly obvious to even the most foolish liberals.

  5. I have a neighbor now who is always talking about owing the government over $20,000 on student loans she incurred in college. Only problem, she does not seem to be able to hold a job for more than about two weeks, due to mental problems and her drinking problems. And she is genuinely worried as the government is hounding her to start repaying on the loans. I'm not sure how she was able to get her degree, since she does not appear very bright to me, but she did, and has the debt, and no real way to pay it back. Her husband, who is dying of cancer, and trying to work is not able to make enough to even keep up with their rent, and they are about to be evicted. Don't know what they are going to do or how she will ever be able to repay any of the loan. She moved in here three months ago, has had and been fired from three jobs during that time, and is now home all day and not coming out to avoid being served the eviction notices. And wonder of all, she and her husband are Obama supporters. The husband, by the way, is getting SSDI and working for the time being, but has finished two rounds of chemo and radiation which have not worked, and he will not be able to work much longer. He beat the crap out of her a couple of weeks ago which is part of why they are being evicted, hit her and knocked her down and then kicked her a few times in the face, leaving her injured enough she had to be taken by EMS to the local hospital. The landlord told her she could stay if she got a protective order which would allow them to keep him off the property, she refused so the couple are both being evicted, so she stays in the house all day, not answering the door and he stays away until late enough at night that he figures the constable won't come by to serve the eviction notice, and they stay here without paying their rent either.