White House: lower student loan interest rates are bad for students

By Lee Russ

Wednesday, January 17, 2007 at 05:12 PM

If you don't laugh at these jackasses, you'll go crazy.  The House of Representatives votes to cut interest rates on student loans, and the White House opposes the bill because (I swear I'm not making this up) "the bill would encourage more student borrowing...encouraging more student debt can also fuel today's upward tuition spiral."

The House on Wednesday overwhelmingly backed legislation to halve the interest rate on some student loans over the next five years, making up the difference to federal coffers by cutting subsidies to lenders.

The bill had wide support from Democrats and Republicans alike, clearing the House on a 356-71 vote. Democrats blocked Republicans from offering amendments, and turned back a GOP-backed measure to send the bill to the House Education and Labor Committee.

The vote came as Democrats picked up where they left off last week on their "100-hour" agenda for the new Congress.

Backers say the move to halve the interest rate on subsidized loans will help ease a growing burden on students.

"This legislation will be a vital first step toward helping lower college costs for millions of low- and middle-income students," said House Education and Labor Committee Chairman George Miller, D-Calif., the chief sponsor of the legislation.

The bill would halve the rates on need-based federal loans for undergraduate students from 6.8% to 3.4% over five years. The rate would decline to 6.12% in 2007; 5.44% in 2008; 4.76% in 2009; 4.08% in 2010; and 3.4% in 2011.

President Bush opposes the bill. The White House Office of Management and Budget released a statement Tuesday warning that the bill would encourage more student borrowing.

"Instead, the administration would support efforts to direct savings to additional grant support for low-income students," the statement said. "Furthermore, encouraging more student debt can also fuel today's upward tuition spiral."

Okay, I get it.  We need to make students pay through the nose for student loans in order to keep tuition down.  Because low interest student loans somehow induce colleges to raise tuition.  Why?  If you can answer that with a straight face you're tailor-made for this administration, folks--that is absolute f'ing nonsense.

Not to mention that the current 6.8% interest rate came from a huge raise that was part of the 2006 Defecit Reduction Act (which raised the rate from about 4.7, which is what the new legislation would return to in the third year of the phased reductions).

Not to mention that the 2006 law's amendments to the student loan programs created huge windfalls for Sallie Mae, the nation's biggest-by-far student lender, and, just coincidentally, a company which is a huge supporter of Republican John Boehner.

Not to mention that while Bush professes to prefer "grants" to loans, the 2006 law upped grant spending by $8 billion, but cut loan funding by $21 billion, a net decrease of 12.7 billion.

You know, by the White House's current "reasoning," we should be actively seeking higher interest rates on mortgages and personal loans, to ensure that consumers don't run up too much consumer debt.