It's pretty clear that there is a student loan problem in the United States. Thanks to an iffy job market and the rising cost of tuition, college graduates have now racked up a staggering trillion dollars in collective debt. Borrowers' average balance has risen by 70% over the last nine years. 13% of borrowers owe over $50,000.
It's bad. And its spillover effect means people in their 20s can't afford to buy homes, take out auto loans, and start businesses. Thus hurting the economy as a whole.
Today brought more bad news for loan-holders, this time affecting those who hold federal Stafford Loans: A law that set the loan interest rate at 3.4% expired July 1, meaning the rate has now doubled to 6.8% for the forseeable future. And since Congress is actually not in session all week—because the members get the whole week off for cookouts and fireworks, not just Thursday like us peons—any agreement to restore the rate to its original 3.4% landing wouldn't affect borrowers who received loans starting today. Like dudes heading into college in the fall. Needless to say, a quick Twitter search finds many angry 18-22-year-olds. (And that's without knowing that the federal government will net $34 billion from loans this year.)
Anyway, both sides of the aisle are more or less at fault for failing to find a compromise. But if there is a silver lining, it's that neither party seems too ideologically entrenched to never work something out. In a helpful breakdown, our friends at Buzzfeed discussed what might happen next:
The GOP-lead House passed a bill in May that would allow interest rate on government loans to float based on the government’s cost of borrowing, but the White House opposed the bill. Tom Harkin, a Democrat from Iowa and the head of the Senate Health, Education, Labor, and Pensions Committee, favors extending the subsidized rate for another year and retroactively adjusting the rates to the lower level of any loans taken out after the current rates expire. A bipartisan group of senators, led by Joe Manchin, a moderate Democrat from West Virginia, came out with a plan last week that would set the interest rate of new loans at the federal government’s 10-year borrowing rate plus 1.85% for undergraduate Stafford Loans.
All the existing plans agree on maintaining the other features of the subsidized program — the no interest for four years and the grace period — there is just disagreement over the rate.
If Congress and the president agree, however, to maintain the 3.4% rate, there might still be time to fix it retroactively because very few loans are actually signed in July.
Alright, my head hurts. Share your stories in the comments.
(Also, if anyone does want to chime in with a comment—and you should, because student debt affects an inordinate amount of us—try to keep it constructive. There are guys out there who get the "right" "employable" degrees, and even they're struggling with debt. Not every person is a victim because he/she majored in bisexual medieval poetry.)