Politico Forgets to Mention Democrats Caused Student Loan Interest Rate Hike Problem

In its update on the coming student loan interest rate hike deal in Congress, Politico dances its blame-the-GOP tap dance once again saying that the coming rate hike is all just “politics.” But somehow Politico forgets to note that this interest rate problem is of the Democrats’ own making in the first place.

Reporting that Congress has signed off on a bipartisan deal to halt the scheduled interest rate increase on millions of student loans, Politico takes a paragraph to “explain” what the hold up was.

Lawmakers moved quickly on Friday to end a legislative dispute that got caught up in politics on Capitol Hill and on the campaign trail, as Obama repeatedly blamed Congress for delaying and Republicans accused the president of being AWOL in negotiations.

Yes, those darned old Republicans were just engaging in “politics.”

But, wouldn’t it have been nice for Politico to note why we got here with this student loan interest rate fiasco?

The fact is the low rate of 3.4 percent, where many student loans now stand, is at that low interest rate because Democrats under Pelosi and then Obama kept, year after year, needlessly lowering it when Democrats ran the House.

Of course there is “politics” being played on the student loan rate issue. The fact is that the new interest rate hike of 6.8 percent was set way back in 2002. But it was the “politics” of Democrats being played since 2007, not just Republicans in 2012, that brought us here.

As it happens, in 2007 Congress wanted the interest rate lowed to 6 percent and so they did. Then in 2008 they lowered it to 5.6 percent. In 2009 it was lowered to 4.5 percent. And finally in 2011 to 3.4 percent. But the whole time everyone knew that the 6.5 percent hike was a law passed years before and that it would hit in 2012. Sadly, if the rates had not been so continually lowered year by year, this issue would not be the big shock that it now is.

Still, it is good that Politico noted the Republican’s complaint that Obama has been AWOL on negotiating. But Obama has made a standard practice out of being AWOL on practically every issue that faces Congress. Obama feels his job is to speak a few soothing words from his tele prompter and then to go play golf. He has rarely engaged lawmakers on any issue — be they Democrat or Republican.

Lastly, there is a big problem with extremely low student loan interest rates that Politico also did not discuss. Low rates naturally encourage more borrowing than is economically supportable.

Low rates will cause more people to borrow to go to college using that cheap money. This gives colleges and universities the false sense that they can raise tuition because they have lots of new students. This also encourages students with lower grade averages to go to college when they may not have if rates were higher. Ultimately, all this disgorges graduates into the labor market, students who become underemployed measured by the degrees they didn’t need or stay unemployed because they cannot make use of their degrees.

It’s a pretty unsustainable education bubble that when it bursts will cause far more problems than a 6.5 percent loan rate!

Cheap student loans are not a good idea. But Politico just wants you to know that those mean Republicans are just trying to use “politics” against that nice President Obama, just the same.

Yes, ObamacareTax IS the Biggest Tax in American History
The First Rule Of Toddler Fight Club Is: You Do Not Talk About Toddler Fight Club
  • retired.military

    Premeptive derp derp derp derp

  • Brucehenry

    “Cheap student loans are not a good idea.”

    Spoken like a man who has no kids.

    • retired.military


      I had a talk with some friends ref this very subject.

      To keep from retyping everything i have cut and paste pertinent sections.

      The question was :Is a college degree a broken model.

      Some of my responses
      Too much fluff in circulums.

      Too much govt involvment in the funding of education. Before you jump on me about poor kids not going to school then let me explain. By my statment I mean I believe that govt money behind student loans etc is the main reason the cost of higher education has skyrocketed. For instance if you had a product that you knew the govt would gaurentee someone buying it for $5000 a year ($100 a semester hour or X dollars for Y units) then what is the incentive to keep costs below that amount set by the govt.
      I am not saying that studnets loans are nescessarily a bad thing I think thye need to be rethought. Especially for classes which are fluff and not part of a hardcore curriculum. It has been shwon that the demand for “liberal arts degrees” (Ie journalism, political science, etc) has almost no job futures. yet the govt is pouring money into those degrees and people are graduating with what amounts to worthless degrees with no job market in them. Why not pay for degrees in buggy whip making? It will have about the same amount of financial impact on someone’s life. I have no problem with degrees in things like math, hard science (the study of geophysical lay lines and their impact on crystals and astrology need not apply) and computers. The country is $15 trillion in debt and there is $1 trillion on student loans out there. Maybe it is time to cut out some of the lobster, prime rib, icream cream and cake and try sticking with the hamburger for bit.

      certifications carry more weight than a lot of degrees nowadays in some areas.

      I read an article a few weeks ago. The average grade in college now is an A.

      If you go to a community college and show up and do the bare minimum effort then you will most likely get an A for that as well.

      In addition I found 2 very good graphs to support my side of the discussion

      I cant post them here. For one google

      Cato Percent change in public school employment and enrollment since 1970

      2nd graph

      Google Cato Inflation adjusted cost of a complete K-12 public education and percent change in achievement of 17-yar olds since 1970

      Basically my point is the cost of education is skyrocketing and the value received hasnt gone up one iota. I feel the major cause of the first half is the govt loaning money. THe more money the govt loans the more colleges jack up the tuitition because they know the students can pay it due to the govt giving out loans like candy. The 2nd half of the equation IMO is caused by the liberal indoctrination in schools and the “we cant let anyone fail” mindset.

    • I’m agreeing with RM quite a bit – if you’ll loan out $X/credit hour to some young sap who doesn’t know any better, then there’s no reason for the college to NOT charge $X per credit hour – even if their costs are a quarter of that.

      After said young sap graduates, they’re on the hook for a degree that either WILL provide them a good living, or one that’ll require them to work at Starbucks and scrape every penny they can to pay down their loans. How many college-educated barristas do we need, anyway? (And why?)

      I don’t know – I think part of the problem was/is the concept that you go to college and come out on the other end with skills that’ll land you a good job. But not everyone’s going to get much out of college – after all, you need good raw material if you’re going to get a good product and with the public schools the way they are… well, what’s going into the college hopper is a bit iffy, you know?

      Maybe the thinking on going to college needs to change. If you don’t know why you’re going, or what you’re going for, it might be better if you didn’t take out a shitload of loans to spend 4 years ‘finding yourself’ – and waking up at the end with a hangover, a worthless degree, an embarrassing tattoo or three, and debt it’ll take you decades to get rid of.

      Save the loans for the hard sciences. If folks couldn’t get loans for ‘social worker’ or other low-paying careers, the cost of education in those fields might well go down.

      • Commander_Chico

        The whole student loan-“higher” education thing is another bubble.

        I used my student loan proceeds to play the market while I was paying with jobs and the GI Bill. I broke even on that (won on gold stocks, lost on oil) Then I got a four year interest-free deferment on payment when I went back into the military. So it worked for me.

        Not sure about no future for liberal arts grads, I got a history BA and did OK even before my graduate degree.

        Anyways, a college degree is the new high school diploma. It’s a way of preserving elite control, if nothing else. Whatever you learn beyond that is a plus.

    • retired.military


      Just for giggles go to http://www.usajobs.com
      Check out the requirements for some of the federal jobs.

      A GS 11 position (base pay about 60k per year). To qualify you either

      a. have to have the experience
      b. have the education requirements (which for a GS-11 is a PHD). Now how many PHDs do you know are making 60k a year? If you have a PHD and you only make 60k a year than one of 2 things is true.
      a. You got a pretty worthless PHD.
      b,. You arent trying very hard to find a job.

  • TomInCali

    This post is straight out of The Onion. The Democrats caused the current problem by lowering the rate? So if they had left the rate higher for all these past years, then we wouldn’t have a problem because they wouldn’t be rising now? That’s surely one of the dumbest things I’ve read on here. Should we then proclaim that the Bush tax cuts are leading to a Republican tax hike? Because, you know, if the Republicans hadn’t lowered the taxes, then we wouldn’t be faced with them rising now.