Students play waiting game while Congress catches up on student loan debacle

This summer, millions of students might see the interest rate double on their student loans unless Congress takes action. Doubling of the interest rate will cost the average college student about $1,000 more per year of school.
Think you’re having déjà vu? Last summer, Congress narrowly stopped interest rates from doubling. One year later, here we are facing the same crisis. This time around, students and taxpayers need a strong long-term solution that makes the student loan system more effective and affordable for students and families.

Wednesday morning, the House Committee on Education and the Workforce held a hearing on the federal student loan program. The consensus among the witnesses who testified at the hearing was that systemic changes are needed. Notably, neither students nor student representatives were among the witnesses called, so here’s our synopsis and response:
•    Student loan interest rates

One major question discussed today was not just what the interest rate on federal student loans should be, but how Congress should set that rate. Currently, federal student loans have a fixed interest rate set by Congress. This rate does not change when the cost of borrowing changes in the market. Several witnesses proposed having a market-based fixed rate. Under this proposal, the interest rate available for federal loans would vary from year to year based on market conditions, but would be fixed for borrowers throughout repayment. There was disagreement as to whether such a rate should have a cap. 

Our take: If we change the rate to a market-based fixed rate, we need protections like a cap to ensure affordability over the long-run. Moreover, some bills we’ve seen change interest rates by shifting debt from the government to students, taking billions out of student aid to reduce the deficit – a move that is bad for students and bad for our country’s future.

•    Income-based repayment

Witnesses also supported increasing participation in income-based repayment as a way of promoting college affordability and decreasing default rates. Under income-based repayment, a borrower’s monthly loan payment is a set percentage of her income. One witness suggested improving financial aid counseling so students know about the repayment options available to them before they find themselves struggling to pay back their loans. Another popular suggestion: automatically enroll all students in a single, income-based repayment program.

Our take: Income-based repayment should be a priority, and we need more students taking advantage of the benefits it offers.  Defaulting students into IBR would ensure that would happen. Federal counseling also needs to be improved, and today, Senators Harkin and Mikulski introduced the Smarter Borrowing Act that aims to do just that.

•    Increase college access and completion

Some participants discussed how a college education is a worthwhile investment. College graduates have lower unemployment rates and can expect to earn more over their lifetimes than those who do not complete college. Having an educated workforce improves the overall economy and benefits society as a whole.

Our take: We know that, they know that, so let’s get to work on making college more accessible and affordable. For example, we need to support investments like Pell grants.

With the looming July deadline, the coming months are likely to invite more congressional noise on the topic. We plan to make sure that students and borrowers are a part of that process. 
Postolowski is a legal fellow at Young Invincibles - a non-profit, non-partisan youth advocacy organization dedicated to amplifying the voices of young Americans and expanding economic opportunity for our generation.

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Romney/RNC almost catches up with Obama/DNC in April.

The New York Times reported this morning that the combined raised total for Romney and the RNC was $40.1 million in April, with Romney having $61.4 million in the bank: in comparison, Obama/the DNC raised $43.6 million. Barack Obama’s own cash on hand for April – it was $104.1 million at the end of March – and we probably won’t be told it until the Sunday deadline, or possibly a little later than that. Though, to be fair, Romney and the RNC haven’t submitted their latest fundraising reports to the FEC, either.

Also: while I give points to the NYT for mentioning that this was a significant jump from Romney’s March haul of $12.6 million, they might have kept comparing apples-to-apples and included the RNC’s March fundraising total ($13.7 million). Or noted that the Democrats’ $43.6 million number for April represents a drop from March’s $53 million. Then again, I suppose that there’s a narrative in place.

The real question, of course, is just how much any of this means. Answer: thanks to the latest round of campaign finance reform, not as much as it would have in 2008. Romney and the RNC having this money is good, because it’ll fund infrastructure, campaign worker payrolls, GOTV efforts, and everything else you need to apply a force multiplier to local/grassroots efforts. And they’ll have the money to get the specific message that they want out. But, thanks to the Citizens United case, groups with an interest in the election have a much larger opportunity to have their voices heard, this cycle. Given that the central message this election will be Are you better off now than you were… heck, last month? you can imagine how much this upsets the Democratic party, despite the fact that nobody’s stopping them from likewise grabbing a microphone and singing out.

One last note: I don’t like lumping Romney and the RNC together like this, because it implies that the relationship between the two is essentially identical to that of Obama to the DNC. Which is false. Romney does not control the RNC the way that Obama owns the DNC; obviously the RNC will be working with the candidate, and naturally the Presidential race is the big one this year. But there are still House and Senate races for the national committee’s consideration. I note this because the DCCC and DSCC have been already told that there’s no DNC money for them*, and they are not happy about it…

Moe Lane (crosspost)

(H/T: @RyanGOP)

*In contrast, the RNC, NRCC, and NRSC have created an interlocking support network for the three national committees, including financial assistance when necessary.

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