It’s nice to see that despite the attempts of the TEApublican-hijacked Congress to distract the country from real progress while they focus on non-scandalous “scandals” that President Obama is pushing forward with his second term agenda. The last few weeks in Washington have felt like 1998 Redux, and eventually if the GOP keeps ignoring what’s really broken in our country, the people of our country will have no choice but to toss them out, Newt Gingrich style. All the gerrymandering in the world won’t keep the Republican majority in the house if they take all this scandal mongering to its most extreme and illogical conclusion — impeachment. President Obama seems to know this, and thus he’s started to pivot his attention to some domestic issues that need immediate redress, not the least of which being student loan interest rates.
This Friday, President Obama will host college students at the White House as a means to bring attention to the issue of just how crippling student loan rates can be. It bothers me, and I daresay it should bother every American — left, right, or somewhere between — that we are giving lower rates to banks than we do to students on the loans they need to go to college. What good does it do us a society to send kids to get specialized education so they can be productive members of society if we’re going to saddle them with so much debt they never dig out of it? Oh wait, I know what good it does.
It gives the banks more money, because if there’s anything banking institutions and the wealthy people who back them need…it’s more money, right?
For the money students spend paying back the banks, why don’t we just send the banks and financiers to college and cut out the middle man? While I understand that professors and faculty at our nation’s colleges need to be paid for their services, why do we need to compensate the banks so much for their services? Sure, the banks deserve to be compensated for taking the risk on a loan to a student whose earning potential we don’t quite know yet. However, the system has been so nakedly swung in the favor of those banks that millions of college graduates are saddled with repaying that student loan for the rest of their lives, and the issue then becomes what impetus students or their parents have in taking out those loans if they’re never going to be able to repay them, or if repaying them will take three, four, five, ten, twenty times longer than obtaining the actual degree takes?
Conservatives of course will kvetch and whine about adjusting the interest rates because the banks will tell them to kvetch and whine. The reality of the situation is that every dollar in interest that a student has to repay to a bank is a dollar that doesn’t go to the local hardware or grocery store. Rather, it’s money that just gets put right back into the banks’ coffers. How many CEO bonuses do you think are funded by the interest payments on student loans?
Neither side, Obama nor the Congressional Republicans, is offering a solution that completely cuts out the financiers’ role in student loan disbursement. The difference is that Obama wants to lock the rates in for students, to keep them from having to pay even more when the markets decide to jack-up interest rates. Adjustable rate mortgages are scary enough, adjustable rate student loans are just cruel.
The bottom line is that we want kids to go to college, and it’s in our best interest to make that choice as attractive as possible. If families can’t see a way to send their kids to college and not leave them hundreds of thousands of dollars in debt, paid at interest rates that will hamstring our future doctors, nurses and teachers (as well as every other occupation that requires an advanced degree), then they’ll have no choice but to stop sending their kids to college altogether, and then the real damage is done to society.
Banks are not worthless institutions, and they do serve an important function in enabling economically disadvantaged families to send their kids to college. Perhaps though, banks need to be convinced, by way of legislation, that student loans should be considered their contribution to society, and therefore should be paid at a rate that will encourage responsible repayment of those loans, while also giving the students some breathing room to secure housing and pay for any food or transportation they need, all of which dump money right back into the economy.
Otherwise, we might as well send little JPMorgan Jr. to go get his degree, for all it’s worth.
Watch a video of the awesome Elizabeth Warren suggesting students and banks should get the same interest rate from the government on loans here: