Republican Education: Student Loan Rates

With the Republicans controlling the House, the next few years of education policy will be a little different, as College Guide has noted before. In particular, student loan rates are going to rise. Earlier this week Education Sector’s Ben Miller took a closer look at how education politics are likely to look in the next congress.

For-profit colleges are still likely to face additional regulation. Pell Grant funding is still in trouble. Interestingly, however, student loans are also going to change. As Miller explains:

Divided government may be a blessing in disguise for providing Democrats with some cover in making a tough choice about student loan interest rates. When Congress passed the College Cost Reduction and Access Act in 2007, it cut the interest rate on Subsidized Stafford Loans in half-from 6.8 to 3.4 percent-by slowly phasing in cuts each year. But it could only afford to keep interest rates at 3.4 percent for one year, in 2011-2012. After that, the provision expires and the rate jumps back up to 6.8 percent.

Democrats tried to fix this problem by making changes to the student loan industry. It didn’t work out so well. This way, the interest rate cuts will expire right around the 2012 election. This will kind of be Democrats’ fault, and they can still blame Republicans.

Nobody actually wants to take responsibility for raising interest rates on student loans by 3.4 percentage points (though as Miller points out, a fixed interest rate of 6.8 percent is still pretty good). This way, no one has to.

Daniel Luzer

Daniel Luzer is the news editor at Governing Magazine and former web editor of the Washington Monthly. Find him on Twitter: @Daniel_Luzer