Stumbling on student loans
Thanks to liberals who look for any opportunity to raise taxes on successful Americans, interest rates on federally subsidized Stafford student loans doubled at the end of June - from 3.4 percent to 6.8 percent. There was no excuse for Congress failing to reach a compromise on the issue, and members could quickly remedy the matter if Democrats would worry as much about protecting taxpayers as playing politics. Members of the Senate did make an attempt at a bipartisan compromise Thursday, but the Congressional Budget Office reportedly found the plan would cost the Treasury $22 billion over 10 years. That will be a deal killer. The Senate needs to focus on the approach advocated by Congressional Republicans and President Barack Obama. They both want to tie student interest rates to the 10-year Treasury rate - now about 2.5 percent.Liberal Democrats such as Massachusetts Sen. Elizabeth Warren have insisted on artificially low rates that will require additional taxes. That's no solution. Florida Gov. Rick Scott had it right when he said, "Doubling the interest rate on federal college loans effectively kills the chances for many Florida families to live the American Dream. ... Fewer students will now be able to attend college and get jobs that require degrees because Washington chose politics over families." Some background: Congress debated reforming the student loan program last year but only could come up with a one-year fix. That expired at the end of June without Congress agreeing on a compromise, though that should have been an easy task. Both the president and the Senate Republicans backed tying the loans to the Treasury rate. The president would add between 0.93 percent and 2.93 percent, depending on the type of loan, to that rate. The Senate GOP plan would add 3 percent. These additions would cover the costs of collections, defaults and related expenses, sparing taxpayers these expenses. Under the Senate GOP plan the rate would remain the same over the life of the loan, but the rate for new loans would change each year according to the Treasury rate. It is encouraging the compromise proposed Thursday did link loans to the Treasury rate, but it also included caps on the loan rates and did not provide sufficient safeguards for taxpayers. Linking the loans to the Treasury rate ensures taxpayers are not forced to subsidize artificially low interest rates when the economy recovers and rates increase. Some Democrats had wanted a fixed 3.4 percent rate, regardless of what the market does. Warren had even insisted on an outrageously low 0.75 percent rate. They would pay for this largess by taxing the "wealthy," the liberal response to any ill these days. Higher federal tax rates is precisely what the fragile economy does not need, any more than it needs inflated student loan rates. But a compromise would be possible if politicians would stop grandstanding and recognize both students and taxpayers deserve protection.