Barack Obama’s warnings about the catastrophe that will be visited on millions of American college students if Congress doesn’t extend the temporary student interest rate reduction Democrats passed in 2007 is largely fictitious.
The Heritage Foundation says Obama is trying to sell college students a “bag of magic beans” because the benefits of keeping current interest rates are “largely illusory”.
Extending the subsidized 3.9 percent interest rate on student loans past June 30 would only affect a fraction of the nation’s borrowers, according to former Congressional Budget Office Director Douglas Holtz-Eakin, writing in National Review’s “The Corner” .
The president’s plan would only affect 23 million loans being directly borrowed from the federal government. Student loans borrowed through private banks would remain unaffected — leaving 29.5 million Americans out in the cold.
And not even all of the federal loans would be covered if Congress were to agree to the president’s proposal because only approximately 9.5 million loans being borrowed through the subsidized Stafford loan program would be touched.
Additionally, Holtz-Eakin argues that the average student borrower would scarcely notice the difference in what they would pay each month because it would amount to an average of $7- roughly the cost of a hamburger, fries and a soft drink in some locations.
The talk about reducing the cost of student loans doesn’t even begin to address the runaway cost of paying for college. Tuition has skyrocketed alongside the growth of federal higher education spending.
For example, according to Heritage, spending on Pell grants has increased by 475 percent since 1982, yet college costs have skyrocketed by 439 percent since 1982.
Heritage expert Mike Brownfield charges that the short-term spending splurge on subsidizing interest for a fraction of the nation’s borrowers does little to make college more affordable in the long run.