‘Don’t Double My Rate’ doesn’t get us anywhere on student loan debt
In a rare point of commonality, likely Republican nominee Mitt Romney and Democratic President Barack Obama now agree that interest rates on federal student loans should remain at 3.4 percent rather than going up to 6.7 percent on July 1 as scheduled. Yesterday, Obama got an entire room of students to chant, “Don’t double my rate.” Unfortunately for indebted students, this basically does jack shit for the actual student debt problem.
In case you haven’t been paying much attention, here’s the gist of it: Student loan debt has now reached an all-time high of $1 trillion, which is more than Americans owe in credit card debt or auto loan debt. About 40 percent of people under 30 have outstanding student loan debt, and the average student loan bill stands at $23,186. (The median debtload is a bit more reasonable at $12,800.) About 86 percent of 4-year graduates borrowed to pay for their educations.
Add to that that that a recent Medill report found that about half of all recent graduates are unemployed, down from 75 percent employment in 2000.
In other words, prospects for the economic future of American students are not looking good. Young people: You’re fucked.
While keeping interest rates down at a time when unemployment, particularly for young people, is high will help a little, it does almost nothing to stop the thing that allows debt to climb that high in the first place: tuition. Skyrocketing tuition, to be more precise.
Tuition has been increasing at about 8 percent a year — that’s more than three times the rate of inflation for the last decade. But it isn’t until colleges start hiking tuition by double-digit percentages that they draw headlines and protests. Last fall the University of North Carolina’s Board voted for a 15.6 percent increase. The University of California’s decision to raise tuition and fees 9.6 percent last fall inspired sit-ins. These state universities weren’t alone. Nationwide, 41 states cut higher education funding in their budgets, for an overall average of 7.6 percent (see a state-by-state breakdown here).
Even public university tuition, which is supposed to be lower and subject to more scrutiny than private school tuition, keeping creeping up and up. Granted, students can still turn to private education, both nonprofit and for-profit, but unfortunately most research finds that for-profit students are less likely to be employed than their nonprofit peers and more likely to be carrying high debtloads.
That leaves students in a jam. Romney’s best offer is for young people to join the military so they can pay for college. Obama keeps making speeches about the importance of a college education— for instance, yesterday he called it the best bet for a pathway to the middle class.
That’s true. If you think unemployment is bad for college graduates, you should check out the unemployment rates for those with some college or a just a high school degree. And for a lot of people, student debt is totally manageable. Still, the number of people who have “manageable” student debt they might be able to pay off while attending school (like a certain House education subcommittee chair) is shrinking.
Students need more than just a temporarily-lowered interest rate on student loans. What they need is for the price of education to stabilize and the economy to start hiring young people again. That might be a lot harder to accomplish than coming up with a budgeting trick to subsidize lower lending rates, but it’s a lot more sustainable.
Updated 4/25 at 3:33 p.m. Eastern.
[Obama at Northern Virginia Community College via the White House / Flickr]