Senate reaches a deal on student loans, and there was much rejoicing

Last summer, President Obama managed to make quite the niche campaign issue out of the scheduled rise of interest rates on new federal student loans from 3.4 to 6.8 percent as a part of his appeal for the youth vote, and Congress agreed to extend the artificially low rates for another year. That provision expired on July 1st, and the Senate has since been quibbling about about disallowing the jump in interest rates once more — with Republicans insisting that rates need to be allowed to more accurately reflect the market value, while Democrats maintained that rates shouldn’t be allowed to climb too high (“too high,” of course, meaning whatever arbitrary number that they oh so augustly deem “fair”).

And there it is, just what the Senate has been so actively hankering for — compromise! Republicans succeeded in allowing the free market to play at least more of a role in determining rates, while Democrats got their caps on the maximum to which interest rates will be allowed to rise. In the meantime, they’re preventing the immediate jump to 6.8 percent and extending the 3.4 percent rate through the 2015 academic year. Via CNN:

Under the compromise measure, undergraduate students would pay a rate of 3.85% next year on subsidized and unsubsidized Stafford loans. The plan would cap rates on loans to undergrads at 8.25%, for graduate students at 9.5% and parents at 10.5%.

“While this is not the agreement that any of us would have written, and many of us would like to have seen something quite different, I believe we have come a very long way on reaching common ground,” Sen. Dick Durbin of Illinois, the Democratic whip in the Senate, said at a press conference Thursday.

Sen. Tom Harkin, the Democratic chairman of the committee that oversees federal education programs, also was present in announcing the deal. …

Speaking after Thursday’s news conference, Harkin said lawmakers may revisit the student loans issue when his committee wades into altering the Higher Education Act in the next several months. …

“Can we change it? Sure we can change it,” Harkin told reporters. “This is not the Ten Commandments written in stone for God’s sake.”

Er… I don’t know how well that plays out for instilling the certainty off of which potential students can devise possible life plans, but there it is. It’s a small improvement, but in the meantime, the federal government is maintaining plenty of the interference in the free market that directly helps to inflate tuition prices by flooding the market with cheap aid, and students are still graduating into a stagnating economy that is hardly flush with available jobs or even showing any real signs of becoming so — which kind of cuts into their ability to even pay back their loans. Priorities.

When the last reports came out showing that youth unemployment had reached 16.2 % in the United States, alarm bells began to be heard in some quarters.  This is more than double the rate of unemployment of the adult population.  The rate is fast approaching the average youth unemployment rate in Europe which stands at approximately 24%. …

So far only 5 European countries (Austria, Denmark, Germany, the Netherlands and Norway) have lower youth unemployment than does the U.S.  Samuel Gregg, of the Acton Institute, who recently wrote Becoming Europe, warns that the U.S. is drifting towards the same policies that generally lead to higher rates of joblessnes among the young.  The U.S. economy still scores better than most European countries in economic freedoms, but the trends are frightening.