Is Subsidizing Students Smart?
William Boardman, Reader Supported News
White House supports policy making students profitable to banks.
emember how hard the White House fought to keep interests rates on student loans from going up this month? You don't? Because the Obama administration pretty much pulled out none of the stops to keep Republicans from forcing student loan rates to double, from 3.4% to 6.8% on July 1.
It's not that Democrats generally fought off Republican plundering of poor people by profiting off their efforts to educate themselves. The Democrats had the votes in the Senate, at least, to act - but Democratic leadership (an oxymoron) lacked the fortitude to force a simple majority vote. Well, why should student loans be any different from almost anything else that falls under the heading of the constitutional phrase, "general welfare?"
Now (July 23), the White House has such a deal for students who borrow, pushing it on the White House Blog: "We've got some good news to share - Senators from both parties have come up with a plan to reduce the interest rates on student loans. Once it becomes law, rates on every single new college loan will come down before the start of the school year."
White House Pushes Plan to Make Poor Pay Their Own Way
The White House Blog graphic shows those 6.8% interest loans dropping to 3.85% for undergraduates and 5.4% for graduate students. That suggests a class-based attitude that the more you poorer people want to improve yourselves, the more indebted we need to make you before you get into our club.
That's bad enough for a White House that couldn't see keeping student loan rates at 3.4% at the expense of banks and government profits. But the smaller print in this "bipartisan plan" blows away any thought of a top rate of 6.8% - instead, future loans will be "capped" at 8.5%-10.5%, which puts some over the traditionally illegal rate of usury (not that that's been relevant for a while).
This may look to some like a White House bait-and-switch scheme and, as it turns out, some Democratic senators are calling it a bait-and-switch scheme.
Senator Jack Reed of Rhode Island had previously fought to keeps the student loan rate at 3.4%, but his party failed to support that. Now, in an effort to head off the White House deal, Reed has offered an amendment that would achieve a pyrrhic victory of capping the student loan rate at 6.8%.
The Reed-Warren Amendment Has Some Outspoken Support
Co-sponsor Senator Elizabeth Warren of Massachusetts, who objects to charging students at a higher rate than the Federal Reserve offers to big banks: "I understand that compromise isn't always pretty, but there isn't any compromise in this bill." In an email headed "The Whole System Stinks," Warren wrote: "Senator Jack Reed's amendment is the only plan on the table right now that guarantees student loan interest rates won't skyrocket above their current levels."
Senator Mazie Hirono of Hawaii, who voted earlier in July for the "Keep Student Loans Affordable Act" that Democratic leadership allowed Republicans to kill with a filibuster.
Senator Richard Blumenthal of Connecticut, who said of the White House deal: "This legislation fails future generations of young people, profits off the backs of students, and adds irresponsibly to the $1 trillion of already crushing student loan debt. Instead, we should return to the 3.4 percent rate on subsidized Stafford loans or reduce it to the same rate offered to some of the nation's largest banks ..."
Senator Sheldon Whitehouse of Rhode Island, who sent an email noting that, "Unfortunately, our opponents would rather profit off our students than invest in them." On his website, he added: "Nearly 8 million low- and middle-income students across the country use Stafford loans.... America is great because we've always worked to create more opportunities for the next generation, not fewer. Frankly, I'm stunned so many of my Senate colleagues will fight tooth and nail to protect subsidies for Big Oil but stand idly by as interest rates are set to double on student loans. It is simply the wrong thing to do, and we need to let them know."
Senator Ben Cardin of Maryland, who notes on his website that "some members of the Senate continue to play politics with student loans ..." Cardin and 21 other senators have called for a federal investigation into loan-sharking allegations against "debt relief" companies that exploit students.
Senator Barbara Boxer of California, who emailed on July 24, "The so-called deal on student loans is a bad deal, and that's why I am headed down to the Senate floor to speak out for students." The same day, Senator Boxer spoke for close to half an hour on the Senate floor making the White House deal's bait-and-switch crystal clear: "Even as the federal government makes $184 billion off the federal loan program, students and families will be forced to pay more under this bill than under current law." [emphasis in original]
Why Shouldn't Government Profits Go to Help MORE Students?
Another amendment to the bipartisan deal on student loans would prevent the government from profiting from student indebtedness by transferring all profits - projected to be about $715 million - to the Pell Grant Program, which gives need-based grants to lower-income students.
Co-sponsor Senator Patty Murray of Washington said of the White House-backed bill, "Every dollar generated from this deal should be a dollar reinvested in making college more affordable."
Co-Sponsor Senator Al Franken of Minnesota argued that: "We shouldn't be balancing the budget and balancing our debt on the backs of students. We need to invest in students."
Interest Rates Going Up for 7,000,000 College Students This Fall
Under any proposal currently before the Senate, some seven million college students will face more expensive student loans when college starts in the fall.
Senator Tammy Baldwin of Wisconsin underscored the bait-and-switch quality of the White House deal: "The bill before us today offers students and families lower student loan interest rates in the near-term but we can fully expect higher student loan interest rates in the years to come. Why on earth would we want to expose our students to higher rates?"
The only non-Democrat voicing clear support for students has been Independent senator Bernie Sanders of Vermont, who said: "We've got to get out of the business of making profits off struggling families who want nothing more than to be able to send their kids to college. This legislation only makes a bad situation worse."
Sanders added, "At a time when Democrats control the White House and the U.S. Senate, we should not support bad legislation almost identical to that passed by a very conservative, Republican-led House."
But that, with President Obama's explicit approval, is exactly what the supposedly representative democracy of American government is about to do, or perhaps has done already - making a bad situation worse.
And, as Senator Boxer noted, the president's policy is making students pay for two wars on the federal credit card, making students pay for an unfunded drug benefit for seniors, making students pay for bailing out dishonest banks, and making students pay for all the corrupt interests who control a majority of the "representatives" of the people.
In Media Spin, This Is a Triumph - As Trampling the Poor Usually Is
[UPDATE, July 25] As anticipated, the Senate bought the deal in a lop-sided evening vote on July 24, after rejecting all amendments. As reported by the Christian Science Monitor (and presumably echoed elsewhere): "Congress is set to notch a significant victory after the Senate passed a bipartisan reform of the nation's student loan system Wednesday evening with a vote of 81-18."
The NBC News spin went like this: "After a series of delays, the Senate passed legislation Wednesday to fundamentally restructure government student loans and reverse the sharp hikes in interest rates that went into effect on July 1. The vote was 81-18, with more than a dozen Democrats voting against the White House-backed plan."
One of the architects of the bill, Senate Democrat Tom Harkin of Iowa, said, falsely (since other views are easily available): "Any way you look at it, this is a good deal for students and a good deal for their families. That's the way this place should run, on compromise."
According to CNN: "The Senate on Wednesday approved a bipartisan deal that ensures lower interest rates on loans for students heading to college this fall."
President Obama, who endorses charging students to pay down the deficit (but not so much people with real money), made an appropriately cynical and misleading statement: "It meets the key principles I laid out from the start. It locks in low rates next year, and it doesn't overcharge students to pay down the deficit."
"The White House is being disingenuous and is trying to sweep under the rug big increases in interest rates for students and parents in the near future," Senator Sanders said in a statement the day before the vote.
In a statement after the vote, Sanders said: "This legislation will make college even less affordable than it is today."
"We have a middle class which is disappearing. The number of Americans living in poverty is near an all-time high. We have millions of families struggling to be able to send their kids to college. So what is the United States government doing? We are helping to balance the budget by saying to middle-class, working families that if you want to borrow money to send your kids to college we are going to make $184 billion in profits off of you. Let me go on record as saying I think that that is a very counterproductive idea. It is a dumb idea."
Sanders, an Independent, joined 16 Democrats and one Republican, Senator Mike Lee of Utah, in voting against the bill. Of the ten Democrats named above, all but Franken and Murray voted against the bill, along with Senators Sherrod Brown of Ohio, Kirsten Gillibrand of New York, Patrick Leahy of Vermont, Ed Markey of Massachusetts, Bob Menendez of New Jersey, Christopher Murphy of Connecticut, Debbie Stabenow of Michigan, and Mark Udall of Utah. Clair McCaskill of Missouri did not vote.
But 81% of the U.S. Senate - most of them multi-millionaires - voted to strip-mine the poor by imposing what amounts to a direct tax on loans to support self-improvement.
William M. Boardman has over 40 years experience in theatre, radio, TV, print journalism, and non-fiction, including 20 years in the Vermont judiciary. He has received honors from Writers Guild of America, Corporation for Public Broadcasting, Vermont Life magazine, and an Emmy Award nomination from the Academy of Television Arts and Sciences.
Reader Supported News is the Publication of Origin for this work. Permission to republish is freely granted with credit and a link back to Reader Supported News.