Government to Put the Squeeze on Students

Six months ago we reported here that default on student debt in a jobless economy is a coming crisis. At the same time that it is generally agreed that we need a college-educated work force to compete economically in the world, Congress is so far doing what it can to make a college education more expensive.

As its members have known for all these months (and as the President reminded them in the STate of the Union), on July 1 the interest rate on the government's Stafford loans will double to 6.8%. They were lowered to 3.4% in 2007 with a sunset clause. Congress still has done nothing to extend the rate cut.

What's wrong with 6.8%? Thanks to the Federal Reserve, banks can borrow money at near 0% (and then make money by sending the borrowings right back to the government to buy Treasury notes). Should the government really be subsidizing the banks with this sweetheart deal while trying to profit from our youth just starting out in life?