There has been much handwringing over Congress’ failure last week to prevent the interest rate from doubling on Stafford college loans.
“Shame! Shame!” cry those who see Washington as the answer to all our ills and who cannot fathom why the great and all powerful Congress failed to “act” to prevent this catastrophe.
Well, OK. Maybe Congress should have pressed the “Pause” button on interest rates until it figured out what to do about soaring college costs. It had multiple opportunities to do so.
But the reality is that Washington got us into this mess to begin with. And Washington is much more likely to make things worse than to get us out of the mess.
Congress has only two gears: Do something, anything, even if it’s the wrong thing. Or do nothing, which is what it did last week.
The interest rate on the Stafford loans was due to rise automatically from 3.4 to 6.8 percent on July 1 unless Congress voted to continue the lower rate. Congress didn’t, and the rate rose on new Stafford loans. That will cost typical student borrowers an extra $2,600 in interest on their loans, according to one congressional committee’s estimate.
Massachusetts Sen. Elizabeth Warren and 6th District Congressman John Tierney, among others, say the solution, or part of it, is to lower the interest rate even more. Warren’s proposal is to let students borrow at the same rate as banks do from the Federal Reserve on short-term loans -- less than 1 percent. There are several problems with that idea -- student don’t have the collateral that banks do and their borrowing is long-term, for example.
But the real issue is that focusing on the interest rate ignores the root problem.
The real problem isn’t the interest rate, it’s that students are forced to borrow so much money because of the high cost of a college degree.