It's an indicator of the crazy economic times we're living in when the interest rate on student loans could nearly double the lowest available rate on home mortgages.
Interest rates on subsidized bank loans to help college students pay tuition traditionally have been among the lowest on any sort of loan as a way to help more Americans get degrees. A well-educated workforce is an economic boon to the nation and worthy of such government help.
Using that reasoning, the Obama administration cut the interest rate on subsidized Stafford loans from 6.8 percent to 3.4 percent for low-income students. But on July 1, the interest is set to revert to the higher rate unless Congress votes to extend the cut.
Congress should do just that.
To make that point, a group including the student body presidents of Utah's colleges and universities wrote to federal lawmakers and called the Beehive State's congressional delegation. They urged Congress to extend the reduced interest rate for another year.
It would be a stop-gap measure, but a necessary one, until the federal government makes a decision on how to handle student loan subsidies and the burgeoning student debt going forward. Economists rightly fear student loan defaults could cause another crisis similar to the one brought on by homeowners borrowing more than they could repay.
Collectively, American students have borrowed $1 trillion to pay for tuition and other college costs. More students are defaulting on those loans as they find their degrees don't translate into good jobs in this sluggish economy. Budget cuts at public colleges and universities have led to tuition increases and fewer sections of classes students need to graduate, meaning it takes longer and costs more to earn a degree.
During the 2010-'11 academic year, more than 180,000 Utah students borrowed $881 million. About 60,000 of the poorest of those would be affected by the rate increase, which would add about $1,000 to the cost over the lifetime of a $5,000 loan.
President Obama and Republican presidential candidate Mitt Romney both have said the Stafford loan interest should be frozen at the current rate at least temporarily. Proposals for a long-term solution have come from diverse quarters, but this divided Congress is not apt to act on any of them this year.
In the meantime, members of both parties in the House and Senate have a responsibility to help these students stay in school with the least debt possible by extending the interest-rate cut.
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