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Readers: Congress should extend 3.4% student loan rate

Four out of five RBJ Daily Report readers say Congress should extend the 3.4 percent subsidized federal student loan interest rate for one year.

Unless Congress acts by July 1, interest rates on federally subsidized Stafford student loans will increase from 3.4 percent to 6.8 percent, which is the interest rate that was in place prior to 2007.

Both President Barack Obama and presumptive Republican presidential nominee Mitt Romney favor a one-year extension of the 3.4 percent rate, but Democrats and Republicans disagree on how to cover the nearly $6 billion cost.

The Democratic-controlled Senate this week took up a bill that would pay for the interest-rate extension using money generated by tightening rules on S corporation shareholder compensation, which currently allow some business owners to avoid employment taxes on much of their earnings.

Sixty percent of Snap Poll respondents favor the Senate bill, versus 40 percent who support a bill approved in April by the Republican-controlled House that would pay for the interest-rate extension by taking money from the Prevention and Public Health Fund established under health care reform to fund community health initiatives and train public health doctors.

Roughly 615 readers participated in this week’s poll, which was conducted May 7.

Should Congress extend the 3.4% subsidized federal student loan interest rate for one year?
Yes: 81% 
No: 19%

The House and Senate bills differ on how to cover the nearly $6 billion cost of extending the low rate. If the low rate is extended, which approach do you favor?
The Senate bill, which would use money generated by tightening rules on S corporation shareholder compensation: 60% 
The House bill, which would use money currently allocated to the Prevention and Public Health Fund: 40% 

COMMENTS:

Public and private colleges are grossly inefficient, with top-heavy bureaucracies and laughably low teaching loads (many tenured professors teach four to six hours a week). Taxpayer subsidies for student loans only serve to support the bureaucracies, not the students. It’s time for schools to check into the reality that taxpayers shouldn’t be subsidizing dozens of “deputy assistant vice deans for whatever” or bloated “institutional advancement” staffs at every college.
—Bob Sarbane

We need to invest in the youth of America. The current college students and graduates represent the future of our country. Raising the college loan interest rates will hamper their ability to purchase a home, buy a car, etc. How do we expect our economy to improve if we restrict the future consumers of America? Not to mention that we bailed out Fortune 500 companies and the banking industry with much more sizable dollars.
—Tony Schmitt, self-employed

Personally, I think we are answering the wrong question. We should be addressing: A. Put the brakes on the runaway school expenses. B: If the student can’t afford to go with work programs etc., then we should NOT finance the education!
—J.A. DePaolis, Penfield

Maybe instead of focusing on student loan interest rates, the president and Congress should focus on why the cost of a college education has far outpaced inflation over the past two decades as college endowments have grown—some into the billions of dollars (e.g. University of Rochester) and yet taxpayer dollars are still funneled toward college projects (see Collegetown on Mt. Hope Avenue).
—Peter Short, Pittsford

Neither bill is an acceptable alternative. Funding should be on raising the tax rate and closing loopholes for those making over $1 million in income per year. Letting the rich get richer at the expense of college students is reprehensible.
—Lee Drake, CEO, Os-Cubed Inc.

Why not use some of the funds from decreasing the defense budget?
—Dyke Smith, Navint Partners LLC

Higher interest rates on student loans will only hurt the U.S. economy in the long run. As students (graduates) struggle to pay off the debt, they will put off spending their money on other things because of said debt.
—Frank Gerham, The 401(k) Coach

Mine didn’t get lowered when I was in school.
—Daniel Mossien, architect

Why not compromise and take half of the cost from the Prevention and Public Health Fund and half by tightening rules on S corporation shareholder compensation?
—Faye Casey, retired

Neither the House nor Senate bills should be used to cover the nearly $6 billion cost of extending the low rate; is this a joke? First: Are not bank interest rates at or near 0 percent? Second: Why did our government take over student loans in the first place with the passing of Obamacare? Third: Did the government not say that (with the takeover of student loans) they could save tremendous amount of fees, costs and interest payments for students? Fourth: Was the government not going to save students much money (interest rates, bank profits, etc.) because of it being taken out of the private banking hands? Fifth: I thought the original premise was that the banks were making way too much money on the backs of all those poor students with huge school loans? So how is this costing taxpayers $6 billion, when private banking was making tens of billions of dollars on these same student loans two years ago?
—G. Palis

Of course they shouldn’t be extended. Why should someone driving a truck 60 hours a week making $40,000 a year that doesn’t have any kids (subsidize) my kids’ education?
—Devon Michaels, Chili

When I bought my first home in 1981, mortgage interest rates were 14 percent. I would have been very happy to obtain a long-term loan for 7 percent. The current low rates are a historic aberration and are (kept) artificially low by Fed manipulation. To lock in unsecured college loans at ridiculous low rates of today is the kind of stupid government folly that caused the mess we are in today. Money is a commodity like any other and should be market priced.
—George Thomas, Ogden

Neither the House nor Senate bills should be used to cover the nearly $6 billion cost of extending the low rate; is this a joke? First: Are not bank interest rates at or near 0 percent? Second: Why did our government take over student loans in the first place with the passing of Obamacare? Third: Did the government not say that (with the takeover of student loans) they could save tremendous amount of fees, costs and interest payments for students? Fourth: Was the government not going to save students much money (interest rates, bank profits, etc.) because of it being taken out of the private banking hands? Fifth: I thought the original premise was that the banks were making way too much money on the backs of all those poor students with huge school loans? So how is this costing taxpayers $6 billion, when private banking was making tens of billions of dollars on these same student loans two years ago?
—G. Palis

Of course they shouldn’t be extended. Why should someone driving a truck 60 hours a week making $40,000 a year who doesn’t have any kids subsidize my kids’ education?
—Devon Michaels, Chili

When I bought my first home in 1981, mortgage interest rates were 14 percent. I would have been very happy to obtain a long term loan for 7 percent. The current low rates are a historic aberration and are artificially low by Fed manipulation. To lock in unsecured college loans at ridiculous low rates of today is the kind of stupid government folly that caused the mess we are in today. Money is a commodity like any other and should be market priced.
—George Thomas, Ogden

With the insane cost of a college education, students need low-interest loans with interest that doesn’t start to accrue until after they graduate. However, more regulations/taxes on S corps which comprise the majority of small business will kill jobs. With manufacturing gone oversees small business is the economic driver of the nation. Not surprised the job-killing Senate and food-stamp president support this.
—Karl Schuler

Congress should not be setting these rates. There should be market forces at work here. Why 6.8 percent when the prime rate is so low? Tie it to treasuries or something. The Federal Government can no longer be borrowing money from China for their pet projects to get them re-elected.
—Bruce Anderson, Alpha & Omega Parable Christian Stores

Leave the federal student loan interest rate alone. College is expensive enough and the students are going into debt based on what they have to pay already. This problem is a government problem based on spending money they haven’t received and shouldn’t receive. Instead of ripping off the college students, the colleges and the government should be working on a plan to make colleges cheaper instead of costing more. Just another good reason when you vote in November vote out ALL the current members of Congress you can. They need to get a message and we need a change that will serve this country not rip off the country.
—Ken Pamatat, Creative Images

The workforce of the future will not be as well educated as it needs to be—especially with the accelerating costs of post-high school education—if the students cannot afford to get student loans at the more reasonable rate. Even at 3.4 percent, it takes years to repay student loans after graduation, although it’s a worthwhile investment. With the economy as weak as it is and the prediction of a decade, at least, to return to full strength, many families are finding it more difficult to assist their children in acquiring advanced education.
—Liz Waidelich, senior vice president, Rochester Midland Corp.

5/11/12 (c) 2012 Rochester Business Journal. To obtain permission to reprint this article, call 585-546-8303 or email rbj@rbj.net.

One comment

  1. This is cr*p! When will we stop babying these adults – and after 18 they are adults! They need to decide (as adults) what college programs to take and weight the cost benefit. I agree with all the posts above that feel that college costs are just inflated because these young adults can get these loans. I also would like to point out that there are jobs available to young adults graduating from two years schools. I give as an example Lisk & FLCC and other programs out there.

    Young adults may need to re-orient their career goals to match job opportunities available.

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