Rotten: Congress Freezes Student Loan Rates for a Year, But Also Moves to Increase Loan Costs by $20 Billion
It wouldn't quite be accurate to say that this week's federal student loan decision was a good news/bad news situation -- it's more like neutral news and terrible news that was buried by many media outlets.
The neutral news is that Congress voted to freeze student loan rates for the next year. If that's all that had happened, it'd just be a matter of revisiting the issue in 2013. Shrug.
But something else happened that is rather rotten. The Washington Post's Ylan Q. Mui reports:
College students are facing a roughly $20 billion increase in the cost of their federal loans, despite a much-heralded deal in Washington to contain the expense of higher education.
Starting Sunday, students hoping to earn the graduate degrees that have become mandatory for many white-collar jobs will become responsible for paying the interest on their federal loans while they are in school and immediately after they graduate. That means they’ll have to pay an extra $18 billion out of pocket over the next decade.
Meanwhile, the government will no longer cover the interest on undergraduate loans during the six months after students finish school. That’s expected to cost them more than $2 billion.
A $20 billion increase (that's billion, with a b!). Great deal, guys!
Also, it's one that doesn't make a lot of sense, considering that federally subsidized student loans actually makemoney for taxpayers, as Mike Konczal pointed out recently at the Next New Deal.