Come July 1, interest rates on federal student loans are set to double from 3.4 to 6.8 percent, a fluke occasioned by 2007 legislation called the College Cost Reduction and Access Act that lowered the rates for four academic years and then let the rates revert.
The political battle is ratcheting up over the reversion, pitting Democrats against Republicans. Today (Friday) the Secretary of Education will hold a White House briefing. On Saturday, President Obama will make the fight the subject of his weekly radio address. And next Tuesday, the President begins a two-day three-stop campus tour at the University of North Carolina in Chapel Hill, plugging for at least a one year freeze on the status quo.
Opponents say that even that limited extension would cost the US Treasury $6 billion in interest not collected. Yes, a lot of interest, until you realize that student loans now total more than all credit card debt, more than $1 trillion.
“Bad policy based on lofty campaign promises has put us in an untenable situation,” mumbled John P. Kline Jr., the Minnesota Republican who is chairman of the House Committee on Education and the Workforce.
“We must now choose between allowing interest rates to rise or piling billions of dollars on the backs of taxpayers,” he said. “I have serious concerns about any proposal that simply kicks the can down the road (the one yeaer freeze) and creates more uncertainty in the long run — which is what put us in this situation in the first place.”
Kline is the bozo who earlier put this dilemma squarely in Democratic hands, calling the four-year duration of the interest break a “ticking time bomb set by Democrats.” Let’s see, this law passed in 2007. In the House of Representatives, 77 Republicans, most of them still in office, voted for passage. And the proposal would never have become law without the signature of President Bush.
One compromise being discussed inside Congress — and being challenged outside — is to cut back the Pell program for low-income students, and use the money to keep interest rates low on the Stafford loans, used mostly by the middle class.
This is also a debate that pits the for-profit education industry, which saps up most of the Pell money, against traditional schools. This presents a conflict for leaders like our own Trustee chair Ricky Wagoner, who is a director of the Washington Post, which owns the Kaplan education behemoth. The president of Kaplan spoke at Duke on Thursday, but escaped the scrutiny that he should have gotten not only on philosophical grounds, but because his company is facing lawsuits alleging it has made big promises to students — almost all of whom falter after their “education.”
What gets me is how the Republicans are insisting on philosophical grounds that the sunset provision in the current law must be allowed to stand. Meaning the four year break will end.
This device has been used in much federal legislation — and Republicans have swung the other way, philosophy be damned. A good example is the inheritance tax, reduced in steps over the course of a decade by the “Bush era tax cuts.” After reaching zero for one year, the tax was due to revert to its highest levels in the next year, and our GOP friends — feeling no pain nor contradiction — rescued the wealthy.
It’s complex… what effect this will have on Duke. Pell Grants are part of the formula to finance need-blind admissions; if they go away, Duke is committed to maintaining the status quo, meaning it is going to have to dig deeper into its own resources.
AND NOW… HERE IS TODAY’S ASK UNCLE DICK
Uncle Dick, half of the subsidy for Kunshan is coming from some fancy footwork in the budget of the Fuqua Business School — using profits we hope to get from the sale of executive training programs. How are sales? Has the delay in opening Kunshan affected things?