Congress’ latest attempt to lower interest rates on student loans will provide little relief for most students, and the minor cut is only temporary.As a result of the College Cost Reduction and Access Act that the Democratic Congress passed in 2007, interest rates on government-subsidized loans were reduced this year from 6.8 percent to 6 percent. This is the first reduction in a plan to cut interest rates in half over four years. Unfortunately, rates will rise back to 6.8 percent after the four-year period. The plan is only temporary and just procrastinates finding a real solution to the student loan crisis. Thousands of students continue to climb into debt each year. Alexa Marrera, a Republican spokeswoman for the House Committee on Education and Labor, said correctly that the Act is “A Band-Aid on a gaping wound.” With such a marginal drop the first year, the only people who will see a real benefit from the act will be students taking out loans those final two years. Being short-lived is not the act’s only flaw. It only affects government-subsidized loans and does nothing to lower the rates of private lenders. Even the lowest interest rate the act will reach-3.4 percent-isn’t much lower than what a student with a keen financial eye could find at a bank or credit union.The temporary reduction is less a solution than it is lip service from Congress. Lawmakers should go back to the drawing board and produce legislation with more bite.However, many of the problems caused by student loans can be avoided by students. Too many students take out exorbitant loans with high interest rates and live beyond their means while going to school. During the past decade, more students have been borrowing, and they have been borrowing more. According to the National Center for Education Statistics, the amount students are borrowing increased 108 percent from 1996 to 2006.Living modestly and within the confines of their paychecks will serve students better than a temporary decrease in interest rates. Meanwhile, Congress should spend the four years they have bought themselves to find a more permanent way to relieve students’ financial woes.[email protected]
House: Congress procrastinates with temporary interest rate reduction
By By House:
July 15, 2008
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