I never found the nuts and bolts of student loans to be particularly interesting. I was clearly just going to take out as many loans as I needed to go to college at the lowest interest rate I could find. Then, I was going to sell my soul to Satan for several years paying them back. It all seemed very straightforward.
This is, after all, the way of the student. We borrow in order to achieve the educational status we need to follow our dreams. Then we pay it back. Considering the relatively high salaries that college graduates enjoy, I'd say the "paralyzing" debt is a pretty good investment.
Thus, it should not surprise you that I was quite skeptical when I heard of the government's new plan to lower interest rates on government-guaranteed student loans. I wasn't sure how, but I was confident that the government was screwing with me in some underhanded way. While I was a bit overzealous in my daydreams of evil government conspiracies, the fact still remains that this cut is not the brilliant angel of redemption that so many people seem to think it is.
Don't get me wrong; the plan to lower interest rates on government-guaranteed student loans is a pretty little plan. It sounds nice. But it's misleading. It doesn't really cut interest rates; it simply shifts them to a different payer. It places the burden of education on taxpayers instead of students. While this doesn't sound bothersome to most people, it should. It isn't rich, white, educated, college graduates who are footing the bill. Taxpayers are, and that includes everyone. In a society where the average college graduate makes about $1 million more than a high school graduate over their lifetime, there is no reason why the 73 percent of Americans who have never been to college should be paying our fees.
Furthermore, the plan simply doesn't accomplish its goals. It doesn't greatly reduce a student's payment plans after graduation, it encourages schools to further hike up tuition costs and it doesn't help to make a college education more attainable.
For a loan of $17,000, which is the average amount of graduate debt, being paid over 30 years at a 6.8 percent interest rate, a graduate will save only $35 a month under the new plan. This is hardly impressive. In fact, I'm willing to bet that it's not going to make or break anyone's ability to repay loans or alter their options of where they can work after graduation. Like I said, it's a pretty little plan and it sounds nice, but somehow I doubt that an extra $35 a month is going to change anyone's future.
Not only will the plan hardly diminish payments, it will likely increase tuition costs. It's a simple argument. Decreasing the interest that students have to pay on their loans encourages students to take out more loans, as they are not as burdened by the cost of this decision. This increases the amount of money students are willing to pay for college. Thus, schools are able to attract the same number and caliber of students at higher tuition rates. Somehow, bureaucrats are still surprised by the drastic increases in tuition. Then, ironically, as rates rise so do the howls of the masses - prices have again skyrocketed! Please, federal government, help us cope! A vicious cycle results.
As if this weren't enough reason to be skeptical, as this flux in interest rates only helps people after they've graduated it does very little for people who can't afford college in the first place. If the issue is not having access to enough loans to pay for your education, this supposed blessing doesn't help. It really only helps those students who already have access to the loans pay them off once they've graduated. Despite popular opinion, few students have problems paying back their loans as it is. Don't get me wrong, it's a tedious and unpleasant process, but I'd venture to say our education is worth it. A more logical solution to college woes is to decrease tuition subsidies. Then maybe colleges and universities would stop overcharging for their services.
Erin Wildermuth is a senior in the School of International
Service and a libertarian columnist for The Eagle.
