Gazette Editorial Board
President Obama comes to the University of Iowa today. His message should get college students’ attention: Do not double the interest rate on federal subsidized Stafford student loans.
Unless Congress acts before July 1, the Stafford loan rate will double, from 3.4 percent to 6.8 percent. If that happens, it would add an average of about $1,000 to each student’s debt. More than 7 million undergraduates from lower- and middle-income families, including 255,404 in Iowa, have such loans.
Actually, the Stafford loan rate was 6.8 percent until the Democrat House majority pushed through legislation to lower it in 2007. Given the current rates’s public cost, estimated at $5.8 billion per year, one could argue that it’s not justified at a time of record budget deficits.
But there’s more to the story.
Student loan debt nationwide is now higher than credit card and car loan debt. Iowa students owe the nation’s third-highest average amount when they graduate. And the job market for people ages 20 to 24 is weak — a 14 percent unemployment rate compared to the overall national rate of about 8 percent.
A college education is becoming more unaffordable for many young Americans. At Iowa’s public colleges and universities, tuition rates have soared 83 percent since 2000. Why add to students’ burden now?
Some Republicans, including likely presidential nominee Mitt Romney, support at least a temporary extension of the lower Stafford loan rate. Others oppose it, pointing to the taxpayer cost and a more pressing need: an economy that provides more, good-paying jobs for graduates so they can better handle their college loans.
Certainly, jobs and the economy are the overriding issues facing the president and Congress. Half of recent college graduates don’t have a job or are underemployed.
In Iowa, unemployment is lower than the national rate but still significant. And much of the problem here is not enough workers with job skills that meet employers’ needs. In the six counties of Benton, Cedar, Iowa, Linn, Jones and Washington alone, more than 14,000 families don’t make enough money to meet their basic living expenses. These mostly are folks with low skills.
Which is another reason not to make Stafford and other subsidized student loans less affordable.
Congress should hold the interest line on this important education funding source. Meanwhile, both parties must work more collaboratively at cutting spending in areas not so vital to young Americans’ financial and career success.
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