Parties Bicker Over Looming Student Loan Crisis

Republicans and Democrats are battling over what to do about the student loan crisis.
Image: Edudemic.com

  While House Republicans managed to approve a bill that would put a Band-Aid over the student loan rates set to double to 6.8% on July 1^st, Democrats, including President Obama, say the bill is just not good enough.  The Republican bill would tie student loan rates to the rates of Federal borrowing, but leave interest rates at variable percentages after the loan has been taken.  The White House has said variable loan rates are unacceptable and a burden to families trying to budget for education costs.

  The House plan is estimated to put borrowing rates at about 4.4% this year, and undergraduate loan interest would be capped at 8.5%.  Newly elected Senator Elizabeth Warren of Massachusetts blasted the bill for taking advantage of students and allowing the Federal government to rake in massive profits from loans of students trying to better themselves.  Warren has introduced a counter bill, her first sponsored piece of legislation. The Bank on Student Loan Fairness Act, as it is called, would set student loans at a fixed rate of .75%, a rate that Warren claims is the rate that big banks get to borrow money from the Federal Reserve. 

Students today are crippled by massive student loan debt.
Image: Jeff Parker / Florida Today

  Already, Warren’s bill is gaining momentum. Six other senators, all Democrats, have signed on to cosponsor the bill and a corresponding bill is being introduced in the house.  Large institutions like the American Federation of Teachers and the Massachusetts Institute for Technology have already endorsed it.  Meanwhile, the July 1^st deadline rapidly approaches and reaching a consensus on student loan rates looks as unlikely as any other congressional issue this year. 

The Congressional Budget Estimates student loans already cost the Federal taxpayers $5.7 billion after defaults are taken into account.  Higher rates, some say, would help pay for the high percentage of loans that are not repaid.  Senator Warren thinks putting the burden on students is unfair, especially in an environment where corporations are receiving better treatment. 

Do you agree?