- - Monday, August 12, 2013


After both parties relentlessly used the #dontdoublemyrate hashtag on Twitter for months, Congress finally passed a bipartisan bill last month to prevent 7 million students from paying 6.8 percent interest rates on their student loans this year — double the 3.4 percent rate students paid last year. Cue the clap soundtrack.

Student-loan interest will now be pegged to the yield on a 10-year Treasury bond. While it is encouraging to see both parties working together past their normal dysfunction, neither party seems to comprehend the real crisis facing students and graduates. Tinkering around with the interest rates won’t fix the real driver of college costs and youth bankruptcy: the rising price of tuition.

In fact, average tuition is up more than 25 percent in the past four years, and this dramatic hike — coupled with Depression-level structural youth unemployment — is causing graduates to default at an all-time high 13 percent.

Imagine if you wanted to take a loan out to buy a $60,000 Mercedes, but you only had $20,000 or less in annual income. Would the interest rate on the loan for that car matter?

No. You wouldn’t be able to afford that car because it is too expensive. Now, imagine if that car was a near-necessity to get a job and start your life — that’s what is facing college applicants. Saving a few dollars a year on interest won’t fix that.

Young Americans are paying these higher costs for a diminished product: Four-year college graduates used to make $1 million more in their lifetime than nongraduates. Now, that number is closer to $300,000.

America’s average student is graduating with nearly $30,000 in college debt, and public-school tuition has gone up more than 8.3 percent in the past year alone.

This high loan debt is hurting the entire economy. Unlike any other time in history, the more education you have, the less likely you are to buy a home. Americans with student debt are 36 percent less likely to buy a home and start their adult lives than those without student debt.

The student-loan crisis is creating a permanent underclass of young people in this country.

Instead of playing political football with the interest rates, the real question Congress must ask is: Should colleges and universities be raising tuition twice as fast as inflation when millions of their graduates can’t find work?

Not only are tuition prices increasing, so are salaries at American universities. In the past four years, college employees have received average pay increases exceeding 9 percent, while median income for younger workers has dropped 6 percent.

Where’s the outrage from Congress? If this kind of “price-gouging” happened in any other industry, members of Congress would certainly call for an investigation and demand regulation.

The problem is that higher education isn’t the only guilty party; Congress is, too.

Congress has written a blank check to universities and left graduates to foot the bill. The nationalized student-loan program puts absolutely no strings attached on these loans for universities. Students can get nearly unlimited loans, usually deferred for five years, for whatever price tag universities want to charge for tuition. In fact, a university could double its tuition and still be eligible to receive loan funding. That’s basically what we have been seeing.

Some want to blame students for choosing to go to college. Of course, students can choose not to go to college and forgo this debt, but Congress is overtly championing and encouraging everyone to attend. Also, we’re asking an 18-year-old to think about a loan he doesn’t have to start paying off for five years, when he expects to have a good-paying job.

A private loan company would never let a teenager take out a huge loan for an overpriced education he simply cannot afford. Congress, however, is more than willing. Just like with federally guaranteed home loans, Congress is encouraging Americans to take on more debt then they can afford.

Nothing could be more morally bankrupt. Congress is setting young Americans up to fail.

The best solution is to start by putting strings and conditions on universities that facilitate these loans. A university that receives funding from these loans shouldn’t be able to raise costs faster than the rate of inflation. In addition, we should examine creating more natural competition in higher education by privatizing these loans altogether.

Needless to say, a real solution involves more than dealing with interest rates. Congress needs to get past the flashy #dontdoublemyrate press conferences and get into the much deeper problem of tuition affordability. That’s the only way to stop the bankrupting of an entire American generation.

Ron Meyer, a Republican candidate for Virginia’s 11th Congressional District, is a former spokesman for Young America’s Foundation.

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