U.S. Rep. Tim Walz, D-First District, joined students and faculty last week to urge Congress to pass a temporary freeze on student loan interest rates.
If Congress doesn’t act, interest rates on government-backed Stafford student loans will double from 3.4 percent to 6.8 percent July 1. The rate increase would cost the average student borrower $1,000 for each year of college over the life of a loan.
Walz said freezing the rate for two years is the first step in a longer journey toward finding ways to reduce tuition costs while providing adequate financial support to colleges and universities.
Under the recently approved House plan, a student who borrows money next year could see his interest rate rise every year after that, like an adjustable mortgage. It would peg new student-loan interest rates to yields on the 10-year Treasury note and set caps on those rates.
In contrast, the Senate plan would let students lock in rates at 3.4 percent for at least two years.
The White House opposes the House measure and has threatened a veto.
House Speaker John Boehner said its measure is a “responsible fix” and predicted the House and the Senate would reach a compromise in conference committee.
U.S. Rep. John Kline, who sponsored the House bill, was less optimistic. “One approach has almost nothing to do with another,” Kline told Bloomberg News. “Senate Democrats and some Democrats in the House are calling to kick the can down the road for two years so Congress can get together again and have a big political fight.”
A big political fight may be in order and some of it should be over student loans.
But most of it should be how we are pushing some of our college students into careers that have little likelihood of paying off that debt.
Minnesota college students now graduate with an average debt load of nearly $30,000, the third highest in the country. Tuition at the seven state universities in Minnesota has increased by more than 100 percent in the past decade.
More than 40 percent of recent U.S. college graduates are underemployed or need more training to get on a career track, according to a poll conducted by the global management consulting firm Accenture. That poll found that many debt-laden graduates are in jobs now that don’t require a college degree.
According to this poll, the top industries that graduates wanted to work in were education, media and entertainment and health care. However, just over half, 53 percent, of graduates actually found full-time jobs in their field of study.
That’s not to say college degrees are worthless. It just depends on the degree.
A Georgetown University study released last week suggests that unemployment is higher for non-technical majors such as arts, law and public policy and information systems but low in education, engineering, health and sciences.
Co-author of the study, Anthony Carnevale, says students aren’t picking the right degreees because they haven’t been given the right guidance.
Carnevale told NPR “we have (300) to 400 students for every counselor in high school” and college guidance offices are generally set up to help students fulfill requirements for their degree rather than helping them determine long-term career goals.
One of the answers to this problem is a bill introduced in May requiring universities to disclose earnings of alumni and the nature of their employment to prospective students.
We’re not sure establishing that direct linkage back to alumni is necessary.
But colleges and universities could take on the responsibility of advising students upon entering college and then throughout their education what the job prospects are in their respective disciplines.
A two-year freeze on student loans should not be considered time to “kick the can” but rather to use that time and establish a long-term solution to the rising cost of higher education and whether that cost is sustainable without radical change.