(From the Washington Examiner):
Subsidized loans drive college tuition, student debt to record levels
By Veronique De Rugy
A proposal to restore the lower interest rate of 3.4 percent on student loans from its recently increased 6.8 percent for another year failed in the Senate on Wednesday. The common response to this vote is that it is a tragedy. It isn’t.
First, even the 6.8 percent rate, students are still benefiting from a significant subsidy; the rate on similar loans that students obtain in the private market is about 12 percent.
Second, extending the lower rate would be reckless since it would continue to artificially inflate the student loan bubble. Data from the Federal Reserve Bank of New York shows that over the past decade, student loan debt has increased by 281 percent, from about $260 billion in the first quarter of 2004 to $990 billion in the first quarter of 2013 and is now higher than the country’s collective credit card debt. In the past year alone, student loans debt has increased by $20 billion. READ MORE HERE