Intro to Compromise

Congress' Deal on Student Loans

Valley News Masthead

For better and for worse, compromise isn’t Sen. Bernie Sanders’ strong suit. If you want somebody to make nice with those on the other side of an issue, the Vermont independent isn’t your man. On the other hand, if you want someone to rise up in righteous indignation, he’s a reliable bet.

So when Sanders showered contempt on legislation emerging from Congress to alter the way the federal government makes loans to college students, we didn’t know if his opposition was well founded or whether it was just Bernie being Bernie. The instances of Congress actually accomplishing anything are rare enough that one is hesitant to be too discriminating in judging what little it manages to achieve. And the student loan bill, passed overwhelmingly by the House last week and the Senate the previous week, was hailed as exactly the sort of compromise Washington needs more often to address other pressing matters.

Not by Sanders. “What I don’t understand,” he said, “is when you have a Democratic president, a Democratically controlled U.S. Senate, why we are producing a bill which is basically a Republican bill?”

Under a law passed in 2007, Congress gave itself the authority to set and change the interest rate charged on student loans. When Congress failed to act and the law expired on July 1, interest rates for subsidized loans doubled from 3.4 to 6.8 percent. Many Democrats, including Sanders, wanted Congress to retain authority over rates for the purpose of setting them low enough to make college more affordable to students from poor and middle-class families. Many Republicans argued that the debt-ridden federal government couldn’t afford to do that and that interest rates should be determined by market conditions, with the terms being reset each year at the beginning of the loan and adjusting over its life.

The bill that emerged sets the interest rate on subsidized loans at 3.9 percent for undergraduates — much closer to the old rate and substantially below the 6.8 percent rate that kicked in July 1. But that’s only for loans taken out for the coming school year. After that, the interest charged on all student loans will be tied to the 10-year Treasury note: the Treasury rate plus 2.05 points for undergraduates, plus 3.6 points for graduate students and plus 4.6 points for loans to parents.
The compromise? Terms will be fixed over the life of the loan, and rates will be capped. Subsidized undergraduate loans cannot climb higher than 8.25 percent, for example.

It is hard to know what to make of the argument by some critics of the compromise that the federal government will actually be making money off the loan program — $184 billion over the next decade, according to Sen. Elizabeth Warren, D-Mass. — because that requires resolving an arcane dispute about what sort of accounting procedures the federal government should use to calculate the cost of the loan program. There can be no doubt, however, that this compromise compromises access to higher education. It is certainly better to establish some ceiling on loan rates, but they will still vary from year to year, making it difficult for families and students to predict what will happen each year when they scramble to figure out how to pay for the next round of tuition bills and other fees. And if the market pushes rates up toward the established ceiling, as the Congressional Budget Office predicts will occur at some point over the next 10 years, a college education will surely become unaffordable for many more students.

While we applaud Congress for this rare outbreak of adult behavior, we share Sanders’ questions about whether the two sides yielded equally to produce this compromise. If this lays the groundwork for future compromises, we suppose it will have been worth it — although we hope future deals seem less lopsided.