The Daily Caller

The Daily Caller

Both sides fail in student loan debate

Photo of Gary Shapiro
Gary Shapiro
President and CEO, Consumer Electronics Association

When elephants fight, the grass suffers. In the fight between our two major parties on how to help college students, the facts suffer.

The debate is ugly. In a recent volley, MoveOn.org ran a full-page print ad in Politico on May 3 headlined “Republicans Must Think We are Stupid” with a picture of three sullen youths. The copy states, in part, “Republicans in Congress say they’ll only keep rates low if they cut funding for women’s health.” It adds that Mitt Romney “supports a budget that would cut Pell Grants by as much as $170 billion.” It concludes, “Keep Stafford loan rates low, and do it in a way that doesn’t try to pit students against women.”

Wow! Romney wants to cut Pell Grants “by $170 billion”! He must hate this program! I had to research this. MoveOn’s hit on Romney cutting Pell Grants seems to be based on his praise for the House-passed Ryan 10-year budget. However, Romney has broken with the Ryan plan, in part by supporting lower interest rates on student loans.

The student loan and grant programs were goosed up by a Democratic Congress and President Obama as a short-term fix in the darkest days of the recession. A closer look at the numbers shows the $170 billion in “cuts” are really an attempt to rein in out-of-control spending on the program. Now MoveOn is attacking Republicans who do not agree that this should be a permanent and growing entitlement.

As the House Budget Committee reported, the cost of the Pell program is projected to more than double, from $16.1 billion in 2008 to an estimated $36.4 billion in 2013, because the recession made more students eligible for the program. A $17 billion cut for one year wouldn’t even make up the Department of Education’s expected $20.4 billion Pell Grant shortfall for 2012.

President Obama’s re-election website puts a positive spin on the increase, stating that Obama “made college more affordable by doubling funding for Pell Grants, increasing the number of recipients from 6 million to 9 million since 2008.” Yet a House Budget Committee report astutely called Pell Grants “the perfect example of promises that cannot be kept.”

House Republicans are at least planning for long-term funding, albeit at a lower rate than some would prefer. Democrats have no visible plan to make up for these shortfalls other than an annual $7 billion addition to the deficit.

The facts may be irrelevant to fringe groups like MoveOn, which infamously ran the “General Petraeus or General Betray Us?” ad, but there are other important factors they’re overlooking. First, interest rates are not going up on all student loans. The affected loans only account for one-third of newly issued student loans and about three percent of current outstanding debt. Moreover, President Obama’s threat of $1,000 in higher payments looks a lot more manageable when it’s broken down over 10 years and works out to about $9 per month.

Second, the House-passed plan to pay for keeping interest rates low on student loans relies on a health care “preventive fund” created under Obamacare. It is not a “slush fund” as Republicans claim, nor is it targeted at “women’s health” as MoveOn and some Democrats claim. The program was created to prevent costly health problems, improve treatment and ultimately cut medical expenses. The fund subsidizes preventative treatment programs that screen for cancer, fight obesity, promote smoking cessation and reduce heart disease. Both parties tried to position this issue inaccurately by defining the fund deceptively.