Telling the whole story: student loans
Posted: Thursday, May 17, 2012 4:08 pm
By: Sen. Lamar Alexander
President Obama has traveled to campuses across America to talk about student loans, but I am afraid the president is not telling the whole story.
If he were to tell the whole story, he would have to tell the students that one of the principal reasons for the rise in tuition and student loan debt is his own health care policies, which are hamstringing states and soaking up the money states should otherwise be using to fund the universities and community colleges of this country.
He did not start many of these policies, but he has made them worse over the last several years. And when the new health care law goes into effect in 2014, its new Medicaid mandates on states will soak up even more of the money states otherwise would spend on their schools.
When public colleges and universities lose some of their state support, they have three choices: become more efficient, decrease their quality, or raise tuition. When tuition goes up, students take on more loans and more debt.
The president has been talking about how to keep student loan interest rates from increasing, and he has proposed that for one year, for new undergraduate subsidized loans, rates would remain at 3.4 percent. Governor Romney and I – and most members of Congress – agree that rates should not go up.
But here’s one of the real drivers of higher tuition and higher interest rates: The government and congressional Democrats who passed the health care law are actually overcharging students — all students — on student loans and using some of the profit to pay for the health care law.
How could Congress be overcharging students? Well, under the health care law, the government took over the student loan program and borrows money at 2.8 percent, then loans to students at 6.8 percent. That produces a profit, some of which is used to pay for Obamacare. The Congressional Budget Office has said that the Congress could have lowered the interest rate from 6.8 to 5.3 percent and save the average student $2,200 over the life of their 10-year loan.
So, I agree with the President that it is a good idea to keep interest rates at 3.4 percent for about 40 percent of new loans for one year. What we don’t agree on, is how to pay for it. Our friends on the Democratic side have come up with their usual methods: They propose raising taxes on small businesses and people who create jobs.
I don’t think we should be raising taxes when we are in the worst recession since the Great Depression. So, I recently introduced legislation called the Interest Rate Reduction Act, which would keep the interest rate at 3.4 percent for new subsidized Stafford loans beginning July 1 of this year, just as the president proposed. But we would pay for that by taking back the money Congress overcharged students on their student loans under the health care law.
The House of Representatives has already passed a bill that would do this. All the Senate Majority Leader has to do is bring up the House-passed bill for a vote here in the Senate, because we all agree on extending the interest rate—we only have a difference of opinion about how to pay for it. I spent my whole eight years as governor trying to increase the amount for colleges and universities, because I thought that was the future of our state.
Last year in Tennessee, state funding for Medicaid went up 16 percent in actual dollars; as a result, state funding for community colleges and the University of Tennessee went down 15 percent in real cuts. What did the University of Tennessee Knoxville do? They raised in-state tuition nearly 8 percent. And what did students do? They borrowed more money.
We cannot continue to order the states to spend more for Medicaid and expect our great colleges and universities to be affordable and continue to be the best in the world.
Respectfully, I say to President Obama, when you visit the next college campus, tell the whole story.