Political Focus:
Student Interest Rates Rising
The U.S. House of Representatives passed legislation on May 23, doubling student loan interest rates from 3.4 percent to 6.8 percent. U.S. Sen. Elizabeth Warren, Mass. has introduced an opposing bill that would cut student loan interest rates to .75 percent, a rate that is close to what banks pay when they borrow from the government.
Sen. Warren’s bill has been read and referred to committee for review. While the bill highlights the absurdity of the fact that bank’s rates are so much lower than students’, it doesn’t address the real problem. The problem with student loan debt is not just the interest; it’s the amount we have to pay in tuition in the first place.
Australia’s public higher education system has an option whereby students attend college initially for free. Then they pay a small amount of money over the course of their career, as opposed to the U.S. system where students are required to make exorbitant loan payments over a shorter period of time.
This type of system makes the idea of college less daunting financially, alleviates the concern over default rates, and is less discriminatory.
Students whose parents can afford to pay for their education have a significant advantage in the U.S. system. These students don’t have to concern themselves with the psychological anchor of student loan debt, and they are in a much better position to begin building a life after college.
Making college more affordable, whether by reducing tuition or reducing interest rates on student loans is in America’s best interest. The G.I. Bill helped create the middle class and the unprecedented prosperity of the 50s and 60s by providing people with cost-free education.
A college education is becoming more of a necessity with each passing year. Education is how we develop the human capital that Nobel Prize winning economist Theodore Shultz considered the key to increased productivity in the workplace.
Shultz also credited investment in education with the rapid recovery of Japan and Germany in the wake of World War II. If Oregon ignores the advice of experts like Shultz by not investing equally in higher education, its significant investment in the K-12 system will be wasted.
Unfortunately, the burden of education has gradually shifted onto students over the years. In 1990, Measure 5 permanently capped the amount of property taxes that could be levied for higher education in Oregon.
Previous to Measure 5, the state paid $2 for every $1 that students paid; now the state pays $1 for every $2 that students pay. Forcing students to come away from college strapped with so much debt for doing what is in the best interest of society is reprehensible.