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

MONTGOMERY, AL (WSFA) - Congress can't seem to make progress on reducing thefederal deficit. President Obama can't seem to do it either. But one group ofAlabamians -- recent college graduates who leave college owing for studentloans -- are doing more than their share to balance the federal budget.

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

A new reportby the U.S. Public Interest Research Group projects that nationally in2013  student loans will generate morethan $36 billion in revenue for the federal government above the cost of theprogram.

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

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

And itcould get worse. The interest rate charged for federally subsidized Staffordstudent 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 ofdollars per year above the cost of the program at the current rate.

IfCongress does not act to prevent that increase, more than 7 million studentsnationally will be forced to pay $1,000 more per loan per year, according tothe USPIRG report.

EXTRA: "Don't Double Our Rates!"

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

Thepresident is scheduled to present a revised student loan proposal as part ofhis budget package. The New York Timesreports that it is likely to contain a proposal for a variable interest rate onloans that will float with the cost of money to the federal government. At thevery least, it should propose blocking the July 1 automatic increase in theloan rate.

Accordingto the Times, many Republicans alsofavor a variable rate, and there appears to be little support at all fordoubling the current rate -- which is already above the market rate.

But likemany other issues in Washington, the fear is that this one could get caught upin the political game of brinksmanship that seems to dominate most interactionbetween the president and Congress.

"Congresscontinues to balance the budget on the backs of college students, sacrificinglong-term investments in our future for short-term political points," said RoryO'Sullivan from Young Invincibles, one of the student advocacy groups thatco-sponsored the USPIRG report, in a news release.

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

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

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

But italso is crucial to take steps to keep higher education affordable for youngAmericans. The federal government does not need to be running up that costunnecessarily.

The risingcost of a college education should be a special concern for Alabamians, sincedeclining state funding for public colleges here in recent years has helped topush up tuition and fees.

At thevery least, Congress needs to ensure that the scheduled doubling of the studentloan interest rate does not occur.

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

Youngpeople need federal policies that make it easier to attend college instead ofpolicies that make higher education even more expensive.


Ken Hare was a longtime Alabama newspaper editorialwriter and editorial page editor who now writes a regular column for WSFA's website. Email him at

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