Student Loan Sideshow

The interest rate on subsidized Stafford Loans is set to double. If Congress doesn’t sort out its differences, seven million Americans will see their student loan rates double, creating further drag on the economy. For more background, here is what I wrote about the student loan issue last week.

The current status of this debate is emblematic of how broken the political process currently is. The House Republicans passed their version of the lower interest rate extension by raiding a key prevention fund in the health care law to pay for it. Without this fund the finances of the health care law break down. Instead of proposing an earnest solution, Republicans are continuing to attack legislation that was duly enacted in the previous Congress.

Initial attempts in the Senate to pay for extending the lower interest rate have morphed from going after the oil and gas industry to the current proposal to close a tax loophole on s-corporations. The current proposal would end a loophole that allowed both John Edwards and Newt Gingrich to avoid paying Medicare and payroll taxes, while paying out hundreds of thousands of dollars in wages.

One of these proposals is a sensible way to raise the necessary money by taxing a narrow type of corporation that is often used to inflate profits. The other is a petty attempt to undermine a law for no other reason than ideological opposition.

Still no pundits, nor politicians, have meaningfully raised the issue of the rising cost of college. As is too often the case, the political classes are narrowly focused on scoring political battles while the real issues are allowed to snowball and Americans suffer. The cost of college is continuing its astrological rate increases, while wages continue to stagnate. Until this issue is addressed, our future outlook remains cloudy, and no interest rate will clear that up.


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