Opinion Blog


Rick Hess Straight Up

Education policy maven Rick Hess of the American Enterprise Institute think tank offers straight talk on matters of policy, politics, research, and reform. Read more from this blog.

Education Opinion

The Sorry Stafford Panderfest

By Rick Hess — April 30, 2012 4 min read
  • Save to favorites
  • Print

Hidy, all. I’m back. Had my head down, crashing away on the Cage-Busting book manuscript. We’ll eventually see how that turned out. Meanwhile, I’ve been blown away by the quality of the guest-blogging, so a special thanks to Jonathan, Chapman, Robin, and Andrew.

Anyway, let’s get back to it, shall we? I’ve been typically disheartened by the Obama-inspired, now-bipartisan panderfest that’s broken out over Stafford loans. For those who’ve been otherwise occupied, here’s a quick recap.

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%, Congress temporarily dropped the undergraduate rate as low as 3.4%. The logic for the fixed 6.8% in the first place was that student advocates were bummed out that interest rates fluctuate and wanted the feds to offer certainty (with the understanding that taxpayers would do well when market rates were low, and that that would hopefully buffer the Treasury against times when market rates were higher). The Bush administration, which never worried about spending a couple billion more bucks, cheerfully went along for the ride.

Now, the temporary 3.4% is set to naturally expire, with undergraduate Stafford loans reverting to the standard 6.8% rate. The impact? Not much. U.S. PIRG, the big “student advocacy” lobbying outfit, calculates the change would cost the average new borrower $2,800 over a 10-year repayment term. That’s about $25 a month. Former CBO Director Douglas Holtz-Eakin has pegged the impact at $7 a month.

Meanwhile, the hit to the federal debt is projected at $30 billion over five years.

How is Washington dealing with asking new college borrowers to forego their extra subsidy of thirty to eighty cents a day? Not impressively. The same President Obama who once pledged that we were done “kicking the can” on tough decisions is pandering for the youth vote (on Jimmy Fallon, no less) by insisting it’s a national imperative to extend the largesse. In a discouraging development, the same Mitt Romney who insists we have to slash spending and put the brakes on Obama’s “government-centered society” quickly caved and joined Obama’s call to extend the break.

In fact, the President has blatantly misrepresented who will benefit and how much the reset matters. He’s been joined by members of Congress who know better (or damn well should). Obama has suggested there will be big savings for recent grads struggling in today’s job market, and that his pandering is actually a response to a temporary, immediate crisis. In truth, the extended subsidy only applies to loans initiated in 2012-13--in other words, for students who won’t be graduating for years and years.

And Congress, which is very good at agreeing on ways to give away freebies to the American public, is now fully on board. House Speaker John Boehner’s office has declared, “Republicans and Democrats on both sides of the aisle and both sides of the Capitol have long agreed this is a problem that must be addressed.” Boehner has said, “What Washington shouldn’t be doing is exploiting the challenges that young Americans face for political gain.” Gack. R’s and D’s, all of whom claim to realize that the feds can’t keep spending a trillion a year more than we collect, are in a frenzied competition to score points off this bit of shameless pandering. (Boehner’s release, which followed Romney’s decision to match Obama pander for pander, was funny because it required an embarrassing pivot by the House Republicans. Just two days earlier, Boehner’s office had admirably argued, “President Obama has said many times, ‘We can’t just keep subsidizing skyrocketing tuition; we’ll run out of money.’ Unfortunately, that’s all the president’s plan does.” But I’m sure this will be only the first of many times that House Republicans abandon principle to accommodate the Romney campaign.)

Five thoughts:

1] The Stafford is a middle class entitlement. We’re not talking about Pell grants for poor students. We’re talking about whether students can get an even bigger subsidy on already-subsidized loans. And yet it’s tough to find a single leader willing to say, “Enough, we can’t keep ladling out dollars we don’t have.”

2] Everyone on Capitol Hill is busy offering an offset to “pay” for the extension. Newsflash: given that we’re borrowing a trillion bucks this year, none of this is paid for. All of those potential cuts (or tax increases) are already needed just to start trimming the existing debt. We need all those cuts and revenue boosts, and to let the 3.4% sweetener expire.

3] The President has insisted that the subsidy is critical because of the tough job market. But the debate only affects loan costs for people starting college in 2012-13, which means they’re mostly relevant for grads entering the workforce in 2017, or later. Is the President trying to tell us that he expects the job market to still be brutal in 2017?

4] Some of us warned in 2007 that the same “student advocates” pushing for the bill would later complain that loan burdens were too big, rates too high, more breaks were needed, and temporary goodies needed to be extended. Shockingly, this has come to pass. Turns out that interest groups never think they’ve gotten enough. Who’d of thunk it?

5] Finally, we really need to stop suggesting that it’s okay to renege on obligations when we decide we no longer like the terms of contracts we voluntarily signed. It’s been a meme the last few years, especially with Occupy Wall Street, and it makes it really hard to teach students to honor their obligations.

The opinions expressed in Rick Hess Straight Up are strictly those of the author(s) and do not reflect the opinions or endorsement of Editorial Projects in Education, or any of its publications.

Events

Jobs October 2021 Virtual Career Fair for Teachers and K-12 Staff
Find teaching jobs and other jobs in K-12 education at the EdWeek Top School Jobs virtual career fair.
This content is provided by our sponsor. It is not written by and does not necessarily reflect the views of Education Week's editorial staff.
Sponsor
Data Webinar
Using Integrated Analytics To Uncover Student Needs
Overwhelmed by data? Learn how an integrated approach to data analytics can help.

Content provided by Instructure
Professional Development Online Summit What's Next for Professional Development: An Overview for Principals
Join fellow educators and administrators in this discussion on professional development for principals and administrators.

EdWeek Top School Jobs

Teacher Jobs
Search over ten thousand teaching jobs nationwide — elementary, middle, high school and more.
View Jobs
Principal Jobs
Find hundreds of jobs for principals, assistant principals, and other school leadership roles.
View Jobs
Administrator Jobs
Over a thousand district-level jobs: superintendents, directors, more.
View Jobs
Support Staff Jobs
Search thousands of jobs, from paraprofessionals to counselors and more.
View Jobs

Read Next

Education 'Widespread' Racial Harassment Found at Utah School District
The federal probe found hundreds of documented uses of the N-word and other racial epithets, and harsher discipline for students of color.
1 min read
A CNG, compressed natural gas, school bus is shown at the Utah State Capitol, Monday, March 4, 2013, in Salt Lake City. After a winter with back-to back episodes of severe pollution in northern Utah, lawmakers and Utah Gov. Gary Herbert will discuss clean air legislation and call for government and businesses to convert to clean fuel vehicles.
Federal civil rights investigators found widespread racial harassment of Black and Asian American students in the Davis school district north of Salt Lake City, Utah.
Rick Bowmer/AP Photo
Education Tiny Wrists in Cuffs: How Police Use Force Against Children
An investigation finds children as young as 6 and a disproportionate amount of Black children have been handled forcibly by police officers.
15 min read
Jhaimarion, 10, reacts as he listens to his mother, Krystal Archie talking with an Associated Press reporter in Chicago on Sept. 23, 2021. Archie’s three children were present when police, on two occasions, just 11 weeks apart, kicked open her front door and tore through their home searching for drug suspects. She’d never heard of the people they were hunting. Her oldest child, Savannah was 14 at the time; her youngest, Jhaimarion, was seven. They were ordered to get down on the floor.
Jhaimarion, 10, reacts as he listens to his mother, Krystal Archie talking with an Associated Press reporter in Chicago on Sept. 23, 2021. Archie’s three children were present when police, on two occasions, just 11 weeks apart, kicked open her front door and tore through their home searching for drug suspects. She’d never heard of the people they were hunting. Her oldest child, Savannah was 14 at the time; her youngest, Jhaimarion, was seven. They were ordered to get down on the floor.
Nam Y. Huh/AP
Education Gunman in 2018 Parkland School Massacre Pleads Guilty
A jury will decide whether Nikolas Cruz will be executed for one of the nation’s deadliest school shootings.
3 min read
Annika Dworet and her husband, Mitch Dworet, wipe away tears as their son's name is read aloud during Marjory Stoneman Douglas High School shooter Nikolas Cruz's guilty plea on all 17 counts of premeditated murder and 17 counts of attempted murder in the 2018 shootings, at the Broward County Courthouse in Fort Lauderdale, Fla. on Wednesday, Oct. 20, 2021. The Dworet's son, Nicholas Dworet, 17, was killed in the massacre.
Annika Dworet and her husband, Mitch Dworet, wipe away tears as their son's name is read aloud during Marjory Stoneman Douglas High School shooter Nikolas Cruz's guilty plea on all 17 counts of premeditated murder and 17 counts of attempted murder in the 2018 shootings, at the Broward County Courthouse in Fort Lauderdale, Fla. on Wednesday, Oct. 20, 2021. The Dworet's son, Nicholas Dworet, 17, was killed in the massacre.
Amy Beth Bennett/South Florida Sun Sentinel via AP
Education Briefly Stated: October 20, 2021
Here's a look at some recent Education Week articles you may have missed.
8 min read