Education

What’s next for student loans?

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Robby Soave Reporter
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The original deadline to rescue the low interest rate on subsidized student loans may have passed, but Congress is revisiting the issue this week and aiming for a retroactive fix.

Senate Democrats have scheduled a Wednesday vote for their temporary solution, which would return the interest rate on subsidized Stafford loans to 3.4 percent after it jumped to 6.8 percent last week.

A bipartisan coalition of Republicans, moderate Democrats and President Obama want to index rates to the financial market, which would keep them low for the next few years but could signal rate hikes down the road.

The White House remained confident that a deal would be reached, even though Senate Majority Leader Harry Reid remained opposed to it.

“We are confident they will get there and that the solution will include retroactive protection for students who borrow after July 1 so that their student loan rates don’t double,” said Matt Lehrich, a spokesperson for the White House, in a statement to the Associated Press.

Kansas Republican Rep. Lynn Jenkins, who gave the GOP’s weekly address on Saturday, urged Senate Democrats to sign off on the bipartisan deal.

“For too long politicians have been in charge of setting these rates,” she said. “On behalf of parents and students across the nation, I call on Senate Democrats to join with us and help pass bipartisan student loan reform.”

Andrew Kelly, a resident scholar at the American Enterprise Institute, said Congress should approve the deal that takes rate-setting out of the hands of the politicians.

“It seems pretty clear that that’s the way to go,” he said in an interview with The Daily Caller News Foundation. “Those proposals would have kept the rates from doubling and delivered more reasonable rates to unsubsidized loans.”

Though student loan interest rates have been the focal point of the higher education reform discussion lately, tinkering with the rate neglects larger problems, said Kelly.

“There are questions that are about how we finance college that are much broader and more important frankly,” he said.

Kelly said policymakers could consider whether universities — which have greatly benefited from generous government loan programs — should bear some financial responsibility if their students default or fail to get jobs.

“Colleges are paid in full no matter what happens to these students,” he said. “Should institutions have some skin in the game when we give out loans?”

Other reformers think student borrowers need better information about how likely they are to pay back their loans. A recent study found that 514 American universities have higher loan default rates than graduation rates.

“Given the importance of defaults, and the recent jump in their numbers, it makes sense for the government to provide more detailed information on defaults, not just as an accountability lever but as a basic consumer right,” said Andrew Gillen, a researcher at Education Sector and author of the study, in a statement.

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Content created by The Daily Caller News Foundation is available without charge to any eligible news publisher that can provide a large audience. For licensing opportunities of our original content, please contact licensing@dailycallernewsfoundation.org.