In the modern day of media communication, headlines swarm the public eye with pessimistic accounts of the “rising costs of college” and “staggering student loan debt” (Wagstaff, 2013). When one considers the financial reality faced by college students, these headlines and quantitative data are not far from the truth. Now, more than ever before in the history of the US, the financing of a university education has become a costly dilemma for college students: a dilemma rooted in a Congressional comedy of student loan errors.
The current issue with federal student loans began in 1992, when Congress permitted government-backed student loans without parent income restrictions (Kantrowitz1, 2014). Once the government made it exceptionally easy for students to borrow massive amounts of money, colleges followed the lead by increasing their tuition rates. It is thus that the sudden injection of millions of additional aid dollars only furthered tuition costs, which have seen a 498.31% rise since 1985 (McMahon, 2013). In conjunction with the government’s continued promotion of the Stafford Loan as a low-cost program, a hyperinflationary cycle of education costs was set in motion (Kantrowitz2, 2014).
The state of the hyper-inflated student loan market further deteriorated in 2013 with the passage the Bipartisan Student Loan Certainty Act of 2013. On July 2013, Congress passed this loan act, known as H.R. 1911, after student loan rates had been allowed to skyrocket from previously fixed rates. H.R. 1911 greatly impacted the student loan rates of the Stafford and PLUS loans—issued to undergraduate students by the federal government—by tying these loan rates to market values and by providing an 8.25% cap on interest rates (Weinberg, 2013).
Apart from altering the interest rates on student loans, H.R. 1911, was also seen as producing a positive economic outcomes in the federal budget. To put these Congressional stipulations into comprehensible numbers, one might consider the words of the US Congressional Budget Office (CBO). The CBO, charged with the task of estimating the costs of the Act, asserts that “H.R. 1911 would reduce direct spending by about $1.0 billion over the 2013-2018 period and by $3.7 billion over the 2013-2023 period” (CBO, 2013). In this way, H.R. 1911 boasts a favorable economic outcome in terms of government spending.
However, it is only by glancing between the lines of legislative jargon that an ominous reality becomes clear: this “reduction in direct spending” will come from the pockets of university students, and is drawn from the idea of student loans as source of profit, rather than an investment designed to create opportunity (CBO, 2013). In this way, the student loan issue becomes a modern age paradox where the scales could be seen as tilted against university students.
As it would seem, Congressional action within the past decades has not been favorable to the economic situation of the average middle class college student and serves as a factor attributing for the ridiculously high costs of college and ever-increasing levels of student debt. Although this modern age dilemma is not set in stone, it will take much effort to level the playing field for financially volatile university students so as to make college more affordable (Ottaunick, 2014).
There are signs that the federal government is trying to reverse these negative trends, as with the College Affordability and Innovation Act of 2014 (GovTrack.US, 2014). However, time will only tell whether or not this act, which aspires to decrease college costs and to improve the quality of education, will be enough to compensate for the flawed financial formula of disaster concocted by Congress which now resonates in the public sphere in the form of further student debt and economic uncertainty.
References:
1. Congressional Budget Office (CBO). (May 20, 2013). Congressional Budget Office Cost Estimate:H.R. 1911. Smarter Solution for Students Act. Retrieved February 8, 2014 from http://www.cbo.gov/sites/default/files/cbofiles/attachments/HR%201911_0.pdf
2. Kantrowitz, Mark1. (2014). History of Student Financial Aid.Retrieved February 8, 2014 from FinAid: the smart student guide to financial aid http://www.finaid.org/educators/history.phtml
3.Kantrowitz, Mark2. (2014). Student Loans. Retrieved February 8, 2014 from FinAid: the smart student guide to financial aid Website: http://www.finaid.org/loans/
3. McMahon, Time. (April, 3, 2013). Inflation Data: Education Inflation. Retrieved February 7, 2014
from InflationData.com Website: http://chronicle.com/article/Senate-Approves-Deal-on/140533/
4. Ottaunick, Taryn. (February 4, 2014). Cost of student loan programs difficult for federal government to determine, study suggests. Retrieved February 8, 2014 from The Daily Free Press: The Independent Student Newspaper at Boston University. Website: http://dailyfreepress.com/2014/02/04/cost-of-student-loan-programs-difficult-for-federalgovernment-to-determine-study-suggests/
5. Wagstaff, Keith. (July, 1, 2013). 3 terrible realities facing today’s college student. Retrieved February 3,2014 from The Week.com Website: http://theweek.com/article/index/246370/3-terrible-realities-facing-todays-college-students
6. Weinberg, Cory. (July 24, 2013). Senate Approves Deal onStudent-Loan Interest Rates, Ending Standoff. Retrieved February 5, 2014 from The Chronicle of Higher Education Website: http://chronicle.com/article/Senate-Approves-Deal-on/140533/
7. GovTrack.US. (2014). S. 1969: College Affordability and Innovation Act of 2014. Retrieved February 6, 2014 from https://www.govtrack.us/congress/bills/113/s1969
PAID 