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Democrats slash college loan interest rates by half |
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Thursday, 18 January 2007 |
by LILLIAN HOGAN
News Editor
A bill that will decrease post-graduation debt for the 59 percent of Appalachian State University students with financial aid passed Wednesday under a Democrat-led House.
The
bill, dubbed the College Student Relief Act, slashed federal Stafford
student-loan interest rates from 6.8 percent to 3.4 percent with a
356-71 vote.
Student Government Association Treasurer Will D. Windley said this is a triumph for loan-borrowing students.
“At Appalachian, we want to produce students who make a difference in society - they can do that better without debt,” he said.
The cost to cut the student loan interest rate in half will be $30
billion to $40 billion over the next 10 years, according to The
Chronicle of Higher Education.
Democrats plan to finance the proposal with savings generated by
cutting subsidies the government pays private leaders to make federal
student loans, Windley said.
Democrats also plan to raise the maximum Pell Grant (the primary source
of aid for the neediest students) from $4,050 to $5,100 and increase
the tax deductibility of college tuition, according to The Chronicle of
Higher Education.
Windley said Congress must investigate fiscally responsible avenues to
increase Pell Grants because $4,000 per year is not adequate to support
a university student.
Assistant economics professor Dr. Mark C. Strazicich is skeptical of the interest rate slash.
“With current budget deficits … I don’t see how [the Democrats] can
afford to do this,” he said. “I would rather see the money used for
need-based Pell Grants, not for a reduction in interest rates.”
Strazicich agrees with some student aid experts who say the interest rate proposal will not help students with low incomes.
“The proposal is going to help primarily middle-class and higher-class
students,” he said. “It will be very costly for taxpayers to subsidize
these students. I think the subsidies should go to low- income students
who can demonstrate clear financial need.”
Financial need is the most common reason given as to why poor students do not go to college, Strazicich said.
“Lower interest is not a good enough incentive - a grant is,” he said.
Rep. Buck P. McKeon (R-Calif.) is also critical of the proposal and leads a Republican crusade against the interest rate cut.
However, 124 Republican representatives voted to pass the bill and 71 voted against it.
Rep. Virginia Foxx (R-NC) was among the nay voters.
The Democrats’ student aid proposals are in contrast to the 2006
Republican-led budget-cutting bill that cut $12 billion from federal
student-loan programs, raised interest rates on loans and locked in
interest rates at a minimum of 6.8 percent for students refinancing
their loans, according to The Chronicle of Higher Education.
“Republicans have gotten a bad rap in the past with student loan
programs and Pell Grants,” College Republican President Fred T. McKaig
said. But there was a huge growth – from $19 billion to $60 billion –
of student aid funds available under a Republican-led Congress from
1995 to 2000, he said.
While McKaig doubts the success of the reduced interest rate, he said the bottom line is if the country can afford it.
“Someone has to pay for this; the program has to stay afloat and an
interest rate is there to keep the program afloat,” McKaig said. “If
[the Democrats] can do it, I’m absolutely for it.”
Some question whether the lowered interest rate is policy or politics.
“Politically, it was popular for Democrats to talk about [interest rate
cuts] during their election campaign,” Strazicich said. “The promise
attracted voters from families without financial need, which is the
majority of voters, and college-aged students.”
McKaig said the interest-rate slash appears like it would help
alleviate college financing issues, “but it’s not real reform, not like
an increase of privatization.
“I don’t believe the federal department of education should even exist
because it mandates programs and the state can’t afford to pay them,”
McKaig said. “I would rather money stay in the state with states
handling their own financial aid packages. If all money is held at the
state level there will be greater accountability.”
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