Do Nothing, Feel Good Student Loan Interest Bill Passes House
Immediate Release. January 19, 2007 At a cost to taxpayers of $6 billion, the House of Representatives passed on January 17, 2007, by a 356 – 71 vote The College Student Relief Act of 2007 (H.R. 5). Annually, about 5.5 million students receive student loans and this measure reduces interest rates incrementally over five years on need-based student loans from 6.8 percent to 3.4 percent. The measure however fell short of Democrats' campaign pledge of lower interest rates for parents who take out college loans for their children.
“The legislation is just smoke and mirrors because as it is written after just six months at the low rate of 3.4 percent, the interest rate escalates back to the current 6.8 percent in January 2012. To help current students, especially those in financial need the legislation does nothing. In fact, this action by the House of Representatives could result in fewer students receiving such loans,” said Dr. Joel P. Rutkowski , president of the American Voice Institute of Public Policy.
Compared to previous student loan interest rates in all but six of the last 42 years the current fixed interest rate of 6.8 percent is lower. Furthermore, over the past few years, interest rates are even lower than the 6.8 percent — between three and four percent for students consolidating and fixing in at variable interest rates. To help students afford current college costs, interest rates have no effect because they do not take effect until after graduation when loan repayment begins.
Relative to tuition and fees, college affordability is dependent on financial aid and family income availability. The Office of Management and Budget has indicated since 2001 that student financial aid has escalated by 400 percent from $9.6 billion to $48 billion, despite critics' claims it has been cut. Students' accessibility or affordability to college is not made possible by reducing interest rates because as many economists currently believe tuition increases actually are the result of student-aid increases. To take advantage of the additional aid, colleges increase tuition accordingly with student aid increases.
“Once again Congressmen in Washington continue to promote legislation that builds on the current Nanny state by creating a new subsidy for college graduates even though responsible lawmakers would not pass such legislation when this nation faces substantial budgetary challenges,” said Dr. Joel P. Rutkowski .
Joel P. Rutkowski, P.h.D.
President, The American Voice Institute Of Public Policy
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