Included in health insurance reform was a bill affecting student loans. The Department of Education has been working on this since last summer when I recall being on conference calls with Sec. Arne Duncan discussing the proposals. Basically this Act reverses the privatization of the student loan business which has cost young people huge amounts of interest. I recall college loans running in the low single digits but today some of these usurious rates pass 20 and 30% interest.
During the Pennsylvania presidential primary two years ago Hillary Clinton asked the students in her audiences (almost every event was on a college campus) what rates they were paying. Hands remained up as she got to 30%. Most seemed to be around 15-20%. Those are obscene rates. Private banks have been ripping off our young people with these usurious interest rates so the President has done something to protect these folks and their financial futures. The government is back in the student loan business again and they are also expanding Pell grants by $36 billion over the next decade. Closing the private bankers gravy train saves $68 billion and ends the taxpayer subsidies for private profit. As Sec. Duncan said on yesterday’s conference call “should we subsidize banks or invest in higher education?”
Other significant facets of the law simplify forms students and parents use to apply, allow erasure of debt for any student who puts in ten years of public service following graduation and eases the burden of loan repayment by capping those at 10% of income.
Saddling our young people with mountains of debt is bad policy. The cost of a college education has soared as state governments continually cut subsidies to balance broken budgets and private lenders soaked them with high interest rates. We faced the prospect of a new generation unable to purchase homes or have disposable income because too large a percentage of their incomes were going to repay these loans. The economic cost of that was prohibitive and simply went to fattening the profits of private banks.