On July 1, the interest rate on student loans doubled from 3.4% to 6.8%. This only applies to future loans. This is the best news that has hit the student loan market in years.
This will restrict the number of students who will take out loans. This is exactly what the market needs. In a market in which it is possible to earn a bachelor’s degree by distance learning for about $15,000, total, any student loans at all are economically suicidal. Yet there are almost $1 trillion worth of these loans outstanding.
The students cannot escape these loans by declaring bankruptcy. Congress changed the bankruptcy law to favor the bankers on this point.
Congress is now facing the “terrible” threat that fewer students will sign up for these loans. This is supposed to be an intolerable burden on the American public. Taxpayers will not be called on to subsidize these loans by offering loan guarantees to banks. This will slow down the sub-prime loan market, which is exactly what the student loan market is.
Today, Democrats blame Republicans, and Republicans blame Democrats. Both sides say they want to get interest rates down to where they were before. But these were subsidized rates. These were government boondoggles. Both parties are rushing to extend the boondoggles again, thereby trapping students in needless debt for needless degrees which can be bought for $15,000 through distance learning, rather than for the students’ parents to pay $50,000-$250,000 for useless liberal arts degrees that will not get the graduates’ decent jobs.
Be thankful for small favors. The interest rate has doubled on these loans, and maybe a few students will now decide not to burden themselves with needless debt for useless degrees.