Bell Curve The Law Talking Guy Raised by Republicans U.S. West
Well, he's kind of had it in for me ever since I accidentally ran over his dog. Actually, replace "accidentally" with "repeatedly," and replace "dog" with "son."

Saturday, January 20, 2007

Student Loans

It went unnoticed by us bloggers, but last week the House passed legislation to decrease interest rates on subsidized Student Loans. This undoes what the previous, Republican controlled Congress did, which was to set student loan rates at a straight 6.8%. Prior to this loan rates had been set to the prevailing rate, capped at 8.75%. The Republicans gave into the lobby of the growing consolidation business. I get almost as much junk mail from consolidators as credit card companies. It is a little sick to see a whole industry getting fat off of the debt of young people. As I have said before, no one is considering the longer term economic ramifications of a whole generation of young professionals strapped with student loan debt.

For starters, this is cited as one reason young professionals are waiting longer to have children and buy homes. This is also in part because we are in school much longer. There are professions that require 4 and 6 year degrees, but that don’t pay much and that are critical to society: social workers (we will need them badly as the population ages), child care workers,
public defenders , city planners, teachers, pharmacists etc. Professions that were once considered trades now require college degrees. These are all vocations that will go underserved simply because they don’t pay enough to cover educational costs. We are in a consumer driven economy, but if people are paying back heavy loans, then there are many things they won’t be able to purchase. University educated Gen Xers will never be able to pay college tuition for their children or help support their aging relatives and friends if they are still paying back their own college debts. What are the social costs of that? University costs and student loans are a crisis in the making.

I chose to take on an extra degree. I wasn’t inventive enough to see how I could excel without a higher degree. I also wanted it for my own personal satisfaction. And I don’t object to paying back what I owe. I am glad that the loans were there so that I could go to school. I do object, however to how much I am paying back.

This new legislation is merely a placeholder until the more comprehensive legislation follows. However, Bush may well veto anything that makes it out of Congress.

For those of us who have consolidated, this legislation will mean nothing since those rates are locked in unless Congress decides to change the consolidation rules. In fact, I spent the last 5 years paying an interest rate that was twice the prevailing rate because of consolidation rules that prevent borrowers from re-financing their loans once consolidated. If they don't change the rules, perhaps they can offer a bigger tax deduction for those of us in repayment? Those deductions could be paid for easily by eliminating the loophole that allows businesses to avoid taxes by renting a post box in the Caymans. Let's all write our Congresspeople!


Anonymous said...

I concur with almost everything USWest said. I just add that I don't see WHY mortgage interest is always deductible, but student loan interest phases out after the $68K earnings mark. Why is home ownership more honored than education?  

// posted by LTG

Anonymous said...

It's even more limited, LTG. YOu can only write off up to $2,000 in interest.

And for the math, for every $1000 I pay off, I have paid $3000 in interest. 

// posted by USwest