The Quest for College Affordability -- and Why Congress’ Latest Student Loan Bill May be in Vain
President Obama continued his two-day bus tour on Friday pushing a new proposal to create a college ratings system that evaluates schools on a number of criteria including average tuition, graduation rates, debt load of graduates and alumni’s earnings.
He says the ratings system will make college more affordable since federal aid will be allocated based on the results of the ratings. The president has stressed college affordability is vital to restoring the middle class, and says the college scorecard will help students decide which schools offer the best value -- and reward those that do.
The bus tour comes on the heels of recent news regarding student debt, an epidemic that is cutting across all age brackets and affecting more than 38 million Americans.
On August 9, the president signed the Bipartisan Student Loan Certainty Act, which ties interest rates on Stafford and PLUS loans to the fluctuations of the 10-year Treasury bond. It’s being touted as a better alternative to the fixed 6.8% interest rate that doubled in July from 3.4%.
But while the passage of this new law, which Republicans and Democrats claim will help students, is temporarily lowering interest rates, in five years, it’s estimated that interest rates will actually end up being higher than before the bill was signed -- and according to the Congressional Budget Office, will make the government an extra $715 million.
The CBO reports that the government is already making an estimated $184 billion from student loans -- and this bill jacks up the number to a staggering $184,715,000,000.
Matthew Holmes, a 24-year-old graduate of Johnson and Wales University, whose student debt is almost $20,000 in principal, says adding in the estimated accrued interest over a 10-year-period hikes his debt to almost $35,000 -- $15,000 more than his current balance.
“I definitely think there should be opportunity for people to go to school who can’t afford it…. But for the government to be profiting off of it, it’s just not right,” said Holmes. “And at the end of the day, the real losers are the kids that graduate because they’re stuck paying off all this debt with high interest rates.”