Tuesday, January 16, 2007

Student Loan Interest Rate Cuts: Who Pays?

Alert reader Marc Scheer sent me a quote from the Christian Science Monitor story that indicates confusion over the financing of the House's proposed interest rate cuts on student loans.

The bill is here if you want to read it. As far as I can tell it doesn't indicate what will happen after 2012 when the rate finally goes down to 3.4%.

Taxpayers aren't paying for it. As the bill reads, the estimated $6 billion cost of cutting loan interest rates from 6.8% to 3.4% will be taken out of government payoffs to student loan companies--Lord knows they can afford it.

The CS Monitor points out that Ted Kennedy, in the Senate, has a much more useful, comprehensive, and costly student aid package, increasing the Pell Grant to $5100 and encouraging schools to switch to the direct loan program. Remember guys, if we eliminated all government payments to student loan companies by switching to the more efficient direct loan program, that could save $60 billion over 10 years to dedicate to student aid.

5 comments:

Anonymous said...

Hey, while we're at it, why don't we eliminate the mortgage interest deduction and save taxpayers nearly $50 billion PER YEAR! Isn't that subsidizing home builders, banks and realtors?

Heck, why not have the government build cars and make computers - after all, it's much cheaper for the government to do everything!

Anonymous said...

Say it ain't so.

The House bill that will be voted on tomorrow ends the 3.4 percent rate on Jan. 1, 2012, six months after it begins.

All this fuss for six months at 3.4 percent. The rate then goes back to 6.8 percent.

Anya said...

hmm...if instead of an economy-stimulating tax credit to individuals, we had a system of payments directly to banks so that they never lost money when people defaulted on mortgages, AND the federal government was ALREADY building 25% of the nation's housing at a high level of quality and for pennies on the administrative dollar...the situation would be exactly the same.

Anonymous said...

I'm obviously not as intelligent as you college grads since I never could figure out the math. All I know is that I pay $420 a month into eternity, eventually paying over $80,000 for my little venture into higher education. My interest rate is 7.75% and half of the $417 a month is spent on interest. With my wife's $20,000 in student loans, we are keeping Sallie Mae alive and kicking into all kinds of ridiculous projects. I get e-mail from them on regarding my elgibility for every type of loan under the sun. For those who see Sallie Mae as "government program", I think they missed the boat.

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