, Gloucester, MA

July 10, 2013

Editorial: Tuition, not loan rates are keys to higher-ed solution

Gloucester Daily Times

---- — There has been much handwringing over Congress’ failure last week to prevent the interest rate from doubling on so-called Stafford college loans.

And OK, maybe Congress should have pressed the “pause” button on interest rates until it figured out what to do about soaring college costs. It had multiple opportunities to do so.

But the reality is that Washington got us into this mess to begin with. And, if tradition holds, Washington is much more likely to make things worse than to get us out.

The interest rate on the Stafford loans was due to rise automatically from 3.4 to 6.8 percent on July 1 unless Congress voted to continue the lower rate. It didn’t, of course, and the Stafford rate soared. That will cost a typical student borrowers an extra $2,600 in interest on his or her loan, according to one congressional committee’s estimate.

Congressman John Tierney and U.S. Sen. Elizabeth Warren — who have, to their credit, been on the front lines of this fight — say the solution, or part of it, is to lower the rate, and there is a context to that. But Warren’s proposal is to let students borrow at the same rate as banks do from the Federal Reserve on short-term loans — less than 1 percent. The typical student doesn’t have close to the collateral or low-risk stability that banks do when borrowing long-term, and that’s the kind of equation that could collapse the entire system.

The real issue, however, is that focusing on the interest rate ignores the root problem. That’s the fact that higher education tuition costs have long since reached the point rate at which students are forced to borrow far too much money to get a degree in the first place.

Higher education has become higher-and-higher education, with hikes in tuition, fees and other costs now outstripping the rate of inflation by better than 2-to-1. And Congress has only fueled the fire by giving it more oxygen — cheaper and more readily available loans and grants.

It’s time that pressure was brought to bear on “Big Education” to drive down prices and, thus, student debt.

One way to do that, suggests Glenn Reynolds, author of “The Higher Education Bubble,” University of Tennessee law professor and influential blogger at “Instapundit,” is to make colleges partly responsible when their graduates can’t repay their loans because they haven’t been equipped to find decent jobs.

Is a degree from this school really worth $40,000 or $50,000 a year? Can it get me a job that will pay enough to repay the loan? That questioning has already begun — and it should.

Meanwhile, statistics show that more students are choosing community colleges, online education or other options that will open a path toward a debt-free life and a career that will support themselves and a family. Those decisions will ultimately force colleges to examine their costs and take steps to restrain or even cut those costs.

In the end, market forces can and should decide what is the right and realistic price point for a college degree and loan — as long as Congress stays out of the way.