If the U.S. has learned anything in the past few decades, it is to never trust Congress to get anything done properly.
After subsidized student loan interest rates doubled to 6.8 percent on July 1, many Americans were angry that Congress failed to keep the rates low.
After much debate, the Senate passed a bill that would retroactively lower all undergraduate student loan interest rates to 3.86 percent, according to The Washington Post.
Although the decrease brings immediate relief to students who plan to take out subsidized and unsubsidized loans for the upcoming school year, a devil lurks in the details of the proposal.
According to The Washington Post, the interest rate on undergraduate loans could rise — even to the 8.25 percent cap — in future years because of Congress’s decision to tie loan interest rates to market rates.
The bill is even worse for graduate students, who could see their interest rates rise to a maximum of 9.5 percent in future years, according to data from The Washington Post.
Adding insult to injury, the federal government is expected to make more than $715 million over the next decade if the plan passes, according to data from The Washington Post.
Because the bill could lead to instability of student loan interest rates, the Daily 49er editorial board does not believe it is a viable option.
Our main concern about the proposal is how wildly interest rates could fluctuate under this market-based system.
Currently, the interest rate on unsubsidized and subsidized undergraduate loans is 6.8 percent.
The Senate’s plan would retroactively lower this to 3.86 percent for this year, but by tying interest rates to the market, it will likely fluctuate in future years.
This means interest rates will change each year, and students will have to find ways to accommodate to those changes.
Although it’s difficult to predict, a future increase in student loan interest rates may lead students to seek loans from other sources.
By “fixing” the system, Congress may cause the federal government to lose thousands of student loan borrowers.
Although the Senate bill does not address the interest rate problem in the long term, there are a few things in the proposal that help students in the short term.
By lowering the current undergraduate student loan interest rate from 6.8 to 3.86 percent, many students will find immediate relief.
Still, it may seem like a small victory, but the lowering of interest rates will only be temporary and may give many students false hope.
Instead of addressing the main obstacles facing higher education, Congress is merely adding to the ever-growing problem: higher education is becoming less affordable with each passing year.