Crippling Our Future

The House of Representatives is poised to pass a bipartisan proposal that will significantly increase the cost of going to college. This proposal would raise the amount of interest students pay on their debt, which averages $17,000 upon graduation. A report by the Congressional Research Service, which has not yet been released, estimates the extra cost per student would amount to between $3,100 and $5,500 for 10- and 15-year loans respectively.

The brewing debate concerns a provision on consolidated loans in the Higher Education Act, which is up for renewal this year. Under the current system, student loans can be locked in at guaranteed low interest rates; the government makes up the difference between the fixed rate of 3.5 percent and the various market interest rates at commercial banks. With interest rates rising, the cost of this program rose to $2.1 billion in 2003 from $650 million the year before.

But the increased cost to the federal government means that the program is better serving students—not that there is cause for alarm. A study from the conservative American Enterprise Institute offered dire predictions of even higher costs if interest rates continue to rise; Republicans—and some Democrats—have since latched onto the issue. Proponents of the bill would offer students variable rates, forcing them to pay the going rate on loans—a move which could make going to college prohibitively expensive for many young people.

While the cost of debt relief for students is indisputably rising, the federal government—and the American economy—has a direct interest in boosting the number of skilled, educated workers with college degrees. College graduates earn an average of $22,000 more per year than high school graduates, and that gap is expected to widen. Corporations need skilled employees, and the government needs well-trained civil servants. The demand for college graduates is higher than ever.

Moreover, it is unclear whether scrapping the consolidated debt program would even save the federal government significant sums in the short term. The proposal would reduce college graduates’ ability to repay their loans, which would likely lead more students to default on their loans. The government would make up much of the difference.

But the move would be harmful and reckless because it would not only discourage people from going to college, but it would also hurt those in the lower income brackets most. Some supporters of this faulty proposal believe that reform will divert money to other programs, which also help low-income students attend college. But the current system performs a valuable service for those in need, and it is already means-tested. Only families that qualify for federal loans are eligible. Supporters of the bill who believe this $2.1 billion will be redirected for education spending elsewhere in the budget are fooling themselves—especially in the current high deficit spending environment.

As the cost of attending college—and the cost of repaying loans—becomes more expensive, it will also reduce the array of career options available to students on financial aid. Rather than working as a nurse or taking a job as a teacher—both fields where demand is incredibly high—more and more graduates will seek more lucrative jobs so that they can pay back their debts. America is better off when more college graduates choose to give back in public service, and this proposal prevents many students from realistically pursuing that option.

Some politicians are proud to reduce spending on education, but their pride is severely misplaced. If the United States is to remain competitive in the world and continue to expand the economy, more Americans must be able to attend college. The House ought to be ashamed about its recent attempts to reduce students’ ability to do so.