Unless Congress stops it before July 1, college students who receive federally subsidized Stafford loans will see their interest rates double - from 3.4 to 6.8 percent. It is a problem nearly everyone saw coming, but the Democrat-controlled Congress of 2007 chose to ignore.
Back then, politicians looking to make a splash passed problematic legislation that progressively lowered the rates on these loans to 3.4 percent this school year. Now, President Barack Obama is asking Congress to throw away the deadline imposed by those hoping for a temporary boost on the campaign trail, and maintain the rates permanently at 3.4 percent. July 1 is just a little too close to November for his taste.
All sides appear to agree that failing to bring the interest rate up to 6.8 percent will cost the federal government billions of dollars. Students who repay these loans at an artificially lowered interest rate will only have to turn around and make up the difference in a manner of Congress' choosing.
We are talking about funding a college education, here. Generally speaking, it takes 10 years for borrowers to repay a subsidized Stafford loan. An extra $1,500 over the course of 10 years works out to an additional $12.50 per month.
To individual students, that is a very small pinch, one they will certainly find a way to bear. But multiplied by the 7.4 million borrowers Obama says will be affected, that is $92.5 million per month.
Legislation aimed at keeping the rate permanently at 3.4 percent has stalled, though Obama's 2013 budget would freeze the rate, anyway. Congress should stick to its guns on this one, or else, as Rep. John Kline, R-Minn., put it, lawmakers will be doing "a disservice to students and taxpayers."