Effective policy and politically popular policy are often separate. In the case of lowering student loan interest rates to make college more affordable, the rhetoric is all bluster and little benefit.
As The Atlantic noted, the push benefits all students with debt, including students who can afford to repay their debt. Besides, its effects are minimum because they’re spread across all income levels.
“Cutting interest rates often saves people just a few hundred dollars, which isn’t much use for seriously distressed borrowers,” Emily Deruy wrote.
In that light, it’s nonsensical that student loan interest rates have become a policy focus. As higher education has become a middle-class entitlement, however, it was inevitable. Voters shape the policy debate. Poor Americans don’t vote often and can’t lack connections to public officials. As the middle- and upper-class are most involved in electoral politics, their interests become the focus. For public spending on higher education, they want their children to gain from it.
The action, then, is more important than the effect. Fiddling with interest rates only have a marginal effect, one that occurs after a student graduates or drops out. “Actually lowering tuition or offering grants while someone is in college makes more sense than telling them they’ll have to pay less interest at some point in the future,” Deruy wrote.
Driving down tuition costs or funding grants, however, is more difficult. Government efforts to make college more affordable has driven up tuition by 40 percent from a decade ago. Graduation rates have improved, but only 59 percent of students earn a four-year degree within six years.
If Americans want to reduce the cost of college and the burden of student debt, they need to recognize that the government has failed to drive down prices. They’ve flooded the industry with easily accessible loans that has allowed colleges to raise tuition. The Department of Education does not hold colleges accountable for low graduation rates, high debt loads, and deceptive practices unless it’s a for-profit college.
American graduates overwhelmingly think their college years were a worthwhile investment, and they’re better off than their non-degreed peers. Student loan interest rates, effectively nationalized, are cheaper than what they could get from private lenders.
“We should make sure that people with student debt can refinance their loans at current rates,” Hillary Clinton said in March.
It’s never made clear why borrowers shouldn’t have to repay their debt. Higher education is presumed to be a right, though graduates benefit the most from a college education. Any effort made by the government to transfer payments from students to the public, it seems, has become justified, regardless of its effects.
