Congress should extend the lower interest rates now set on federally subsidized student loans for millions of college students without raiding a health-care fund to pay for it.
Lawmakers on both sides of the aisle agree that the interest rate should be frozen for at least another year, but disagree on how to best to pay the estimated $6 billion needed to keep the rate from doubling from 3.4 percent to 6.8 percent in July.
In an obvious slap at President Obama, the Republican-controlled House voted Friday to extend the lower rate by slashing $6 billion from a fund created by the health-care-reform law for breast and cervical cancer screenings, child immunizations, and prenatal tests for birth defects.
A better proposal introduced by Senate Democrats would pay for the extension by stopping lawyers, architects, and other professionals in small firms from avoiding payroll taxes by characterizing some of their income as shared profits instead of salary.
Unless Congress acts, about seven million undergraduates would pay higher interest on the popular Stafford loans, which typically are issued to middle-class families. It would add $1,000 to the average new loan.
Former President George W. Bush in 2007 signed the bill setting the current rate for five years. It was passed with bipartisan support in a Democratic-controlled Congress.
Obama pushed the idea of extending the lower interest rates this past week at college campuses in North Carolina, Colorado, and Iowa. Not surprisingly, the idea played well with the college crowds. Obama was accused of playing politics, but his likely GOP opponent, Mitt Romney, has said he also supports keeping the interest rate low.
This is another critical issue facing today's college students. The rising cost of tuition has put a college degree out of reach for many worthy students. Many have decided to skip college or leave without obtaining a degree.
Student loan debt is expected to reach $1 trillion, surpassing credit-card and auto-loan debt. As student debt continues to grow and more borrowers default, it jeopardizes the still-sluggish economy and ultimately affects all taxpayers.
According to some estimates, new graduates owe more than $25,000 by the time they leave college. Strapped with loan payments, young people who are unemployed or underemployed cannot fully contribute to the economy.