Posted on 04/30/2012 6:15:11 AM PDT by SeekAndFind
Inspired by President Obama’s cheap election-year politicking, Congress has launched into a frenzied, bipartisan panderfest over the Stafford loan program. Late last week, an emotional House speaker John Boehner led House Republicans to vote for an Obama-proposed giveaway he’d denounced just a few days previously.
For those who don’t eagerly track the ins and outs of federally subsidized student loans, here’s the deal: Five years ago, in a piece of cheap political theater, Democrats in Congress wrote an additional sweetener for federally subsidized Stafford loans into the College Cost Reduction and Access Act. Beyond offering college loans at a guaranteed rate of 6.8 percent, Congress temporarily dropped the undergraduate rate as low as 3.4 percent. The fixed rate was demanded by student-loan advocates who disliked the fact that interest rates fluctuate and wanted the feds to offer certainty (and understood that the rates would have to be high enough that they wouldn’t drain the U.S. Treasury). The Bush administration, which never worried about spending a couple billion more, cheerfully went along for the ride.
Now, the temporary 3.4 percent is set to naturally expire, with undergraduate Stafford loans reverting to the standard 6.8 percent rate. The impact? Not so much. U.S. PIRG, the big “student advocacy” lobbying outfit, calculates that the change would cost the average new borrower $2,800 over a ten-year repayment term. That’s about $25 a month. Former CBO director Douglas Holtz-Eakin has pegged the impact at $7 a month.
Meanwhile, the projected hit to the federal debt is projected at $30 billion over five years.
The Stafford program is a middle-class entitlement. We’re not talking about Pell grants for poor students. We’re talking about whether students can get an even bigger subsidy on already-subsidized loans. And, while everyone on Capitol Hill is busy offering an offset to “pay” for the extension, it’s useful to remember that we’re borrowing a trillion bucks this year. That means that none of this is paid for. All of those potential cuts are already needed just to start trimming the existing debt.
How is Washington dealing with asking new college borrowers to forgo their extra subsidy of 30 to 80 cents a day? Not impressively. The same President Obama who once pledged that we were done “kicking the can” on tough decisions is pandering for the youth vote (on the Jimmy Fallon show, no less) by insisting it’s a national imperative to extend the largesse. In a discouraging development, the same Mitt Romney who insists we have to slash spending and put the brakes on Obama’s “government-centered society” quickly caved and joined Obama’s call to extend the break.
In fact, the president has blatantly misrepresented who will benefit and how much the reset matters. He’s been joined by members of Congress who know better (or damn well should). Obama has suggested there will be big savings for recent grads struggling in today’s job market, and that his pandering is actually a response to a temporary, immediate crisis. In truth, the extended subsidy applies only to loans initiated in 2012–13 — in other words, for students who won’t be graduating for years and years.
Congress, which is good at agreeing on ways to give away freebies to the American public, is now fully on board. Boehner’s office has declared that “Republicans and Democrats on both sides of the aisle and both sides of the Capitol have long agreed this is a problem that must be addressed.” Boehner has said, “What Washington shouldn’t be doing is exploiting the challenges that young Americans face for political gain.”
On Capitol Hill, Republicans and Democrats all claim to realize that the feds can’t keep spending a trillion a year more than we collect, but are in a frenzied competition to score points off this bit of shameless pandering.
Boehner’s release, which followed Romney’s decision to match Obama pander for pander, was funny because it required an embarrassing pivot by the House Republicans. Just two days earlier, the speaker’s office had admirably argued, “President Obama has said many times, ‘We can’t just keep subsidizing skyrocketing tuition; we’ll run out of money.’ Unfortunately, that’s all the president’s plan does.”
Doubtless, this will be only the first of many times that House Republicans abandon principle to accommodate the Romney campaign. Just imagine if this weren’t the most conservative House in memory.
— Frederick M. Hess is director of education-policy studies at the American Enterprise Institute.
Boehner and his gaggle of RepublicRAT RINOs are beyond contempt!
No fan of Boehner here, but didn’t he outline the offer to pass it, but with the funding coming from Obamacare?
I could be completely off-base here, but I thought it might be a shrewd move to start the defunding process of the health-care takeover.
Given that they lost on about every stand they have taken it is no surprise that they are flipping on this popular middle class handout.
At least they selected a way to pay for it that Dems cant accept, with obama-care funding. In that way it makes it ‘free’ in a way. Now the question is if Republicans cave once more and pay for it with deficit spending, like they did the other stuff.
Lord Romney is already on board.
John Boehner is a house whore.
OK, here’s the deal for those who have been sleep walking through the last two decades, and especially the last four years. The only way to get elected is by promising more and better free stuff to more people than the other guy. This is because there is seemingly no penalty for allowing The Federal Reserve to print as much free money as it wants.
This is not going to end well.
Since it only got 13 Dem votes and only 30 Rs voted against it, there must be some good in it.
http://clerk.house.gov/evs/2012/roll195.xml
Haven’t followed this issue myself.
Since this is a House bill I assume Harry Reid will throw it in the trash and send back something much worse anyway.
And the really stupid truth of the student loan set up is that even if a student gets loans for four years at the lower rate, once they graduate and want to consolidate their loans into one payment, the rate changes. 6.8 is the current loan rate so unless the student wanted to make four payments each month over the length of the loan and keep the lower rate, they are going to a higher rate anyway.
Boner strikes again....
Give Boehner as raise!
The really stupid part is that Repubilcans should embrace this and then run advertising about how it benefits new loans not old loans - they should call Obambi on the fake deal and YELL “This just like the fake mortage deal, the fake green jobs deal the fake shovel ready deal. Every offer this presidnet makes is good for someone but not who he tells you!!” People hate the idea of being called SUCKER they will know in their hearts he is a phony and will vote him out. All because “the truth will set you free.”
These loans are only “subsidized” if the kids don’t pay them back. Otherwise, a 4% interest rate is well above the current cost of money for a short-term loan. Banks get money and pay 0.2% on it, they could afford to lend it out at 4%. Of course, the government owns student loans now, and they will probably forgive a lot of them at some point, but for government the cost of money is really low (10-year treasuries are what, 2%?). So the government can borrow money at 2%, and if they lend it out at the current 3.85%, they actually make money on the student loans — again so long as they get paid back.
And the House wants to fund this by taking money out of Obamacare — so that’s a win-win.
It’s not like Obama, promising to use half the “savings” from not fighting the war on terror to “pay down the debt”, when the entire cost of the war was paid for by deficit spending.
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