Ken Hare In Depth: Federal government pushes up cost of higher e - WSFA.com Montgomery Alabama news.

Ken Hare In Depth: Federal government pushes up cost of higher education

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MONTGOMERY, AL (WSFA) -

Congress can't seem to make progress on reducing the federal deficit. President Obama can't seem to do it either. But one group of Alabamians -- recent college graduates who leave college owing for student loans -- are doing more than their share to balance the federal budget.

That's because of something most students who get college loans don't realize: The federal government actually makes money on college loans. Lots of money.

A new report by the U.S. Public Interest Research Group projects that nationally in 2013  student loans will generate more than $36 billion in revenue for the federal government above the cost of the program.

That, of course, runs up the already high cost of college for students who have to rely on loans. In Alabama, that is a majority of those who attend college.

About 54 percent of recent college graduates in Alabama leave college in debt, which ranks 33rd in the nation. And those in Alabama who have debt owe an average of $25,192, which ranks 22nd in the nation.

And it could get worse. The interest rate charged for federally subsidized Stafford student loans is scheduled on July 1 to double from 3.4 percent to 6.8 percent, despite the fact that the federal government is already clearing billions of dollars per year above the cost of the program at the current rate.

If Congress does not act to prevent that increase, more than 7 million students nationally will be forced to pay $1,000 more per loan per year, according to the USPIRG report.

EXTRA: "Don't Double Our Rates!"

The rate was set to go up last year, but Obama and Congress delayed the increase. It was, after all, an election year.

The president is scheduled to present a revised student loan proposal as part of his budget package. The New York Times reports that it is likely to contain a proposal for a variable interest rate on loans that will float with the cost of money to the federal government. At the very least, it should propose blocking the July 1 automatic increase in the loan rate.

According to the Times, many Republicans also favor a variable rate, and there appears to be little support at all for doubling the current rate -- which is already above the market rate.

But like many other issues in Washington, the fear is that this one could get caught up in the political game of brinksmanship that seems to dominate most interaction between the president and Congress.

"Congress continues to balance the budget on the backs of college students, sacrificing long-term investments in our future for short-term political points," said Rory O'Sullivan from Young Invincibles, one of the student advocacy groups that co-sponsored the USPIRG report, in a news release.

According to the USPIRG report and to a Congressional Budget Office study, the federal government will make 12.5 cents on the dollar for each subsidized Stafford dollar loaned, 33 cents on each dollar loaned through the unsubsidized Stafford loan program, 54 cents on the dollar through the Graduate PLUS loan program, and 49 cents on the dollar for parent loans.

Balancing the federal budget and reducing federal debt are important issues -- issues that the president and Congress need to work together to address.

ON THE WEB: CBO Feb. 2013 Baseline Projections for Student Loan Program

But it also is crucial to take steps to keep higher education affordable for young Americans. The federal government does not need to be running up that cost unnecessarily.

The rising cost of a college education should be a special concern for Alabamians, since declining state funding for public colleges here in recent years has helped to push up tuition and fees.

At the very least, Congress needs to ensure that the scheduled doubling of the student loan interest rate does not occur.

But even more important in the long run, the president and Congress need to work together to develop comprehensive student loan reform that will make the student loan program a break-even proposition for the federal government.

Young people need federal policies that make it easier to attend college instead of policies that make higher education even more expensive.

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Ken Hare was a longtime Alabama newspaper editorial writer and editorial page editor who now writes a regular column for WSFA's web site. Email him at khare@wsfa.com.

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