Americans are justly proud of touting the GI Bill as one of the nation’s most forward-thinking and successful social programs. But where is the equivalent program today?
The GI bill enabled thousands of veterans returning from World War II to get virtually free college educations. That helped spur an era of economic prosperity and stability.
Today, a college education has become far less accessible, especially to teens from low-income families.
Federally subsidized Stafford loans have helped millions pay for a college education. But now, interest rates on Stafford loans for 7 million students are set to rise from 3.4 percent to 6.8 percent July 1.
Both parties say they would like to avoid the sharp increase, but they differ on how to accomplish that. We think that, in the spirit of the GI Bill, the top priority should be to make college affordable through low-interest loans.
Under a bill passed in the Republican-controlled House, the Smarter Solutions for Students Act, the interest rate on student loans would be tied to the 10-year Treasury rate, plus 2.5 percent, capped at 8.5 percent.
But this would be a variable interest rate that could change from year to year depending on the Treasury rate, projected to rise steadily over the next four years.
Worse, if the interest rate were to rise close to the cap before students graduate, they would end up paying a higher rate than if Congress did nothing and let rates double to 6.8 percent as scheduled July 1.
In the past, President Barack Obama also has proposed tying the interest rates to the Treasury rate but adding only 0.93 percent. Obama also would lock in rates for the life of the loan rather than allowing them to float year to year.
Senate Democrats, by contrast, have said they plan to introduce a bill to freeze the rate at 3.4 percent for the next two years while Congress seeks a long-term solution. The Obama administration now supports that plan.
Democratic Sen. Elizabeth Warren of Massachusetts is pushing a plan to tie the student loan rate to the rate the Federal Reserve charges banks for a year. Warren argues we should be giving students the same break we give big banks.
Creating variable rates for student loans, as the Republican bill does, would create crippling economic uncertainty for struggling students.
Either of the other options is preferable. We jeopardize the future of the nation if young people decide they can’t afford to go to college.