Inspired by President Obama’s cheap election-year politicking, Congress has launched into a frenzied, bipartisan panderfest over the Stafford loan program. Late last week, an emotional House speaker John Boehner led House Republicans to vote for an Obama-proposed giveaway he’d denounced just a few days previously.
For those who don’t eagerly track the ins and outs of federally subsidized student loans, here’s the deal: Five years ago, in a piece of cheap political theater, Democrats in Congress wrote an additional sweetener for federally subsidized Stafford loans into the College Cost Reduction and Access Act. Beyond offering college loans at a guaranteed rate of 6.8 percent, Congress temporarily dropped the undergraduate rate as low as 3.4 percent. The fixed rate was demanded by student-loan advocates who disliked the fact that interest rates fluctuate and wanted the feds to offer certainty (and understood that the rates would have to be high enough that they wouldn’t drain the U.S. Treasury). The Bush administration, which never worried about spending a couple billion more, cheerfully went along for the ride.
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