There he goes again.
Only a week after Senate Majority Leader Harry Reid to rammed the Marketplace “Fairness” Act through the Senate, he is once again circumventing normal order and thereby avoiding the legislative and public scrutiny of hearings, mark-ups, and other aspects of the committee process that risk derailing his agenda. Those who remember their high school civics class will recall that the Senate is supposed to be the chamber of deliberation where, as George Washington supposedly said, House legislation is “cooled” like hot tea in a saucer. The Harry Reid Senate is more tea kettle than saucer these days as legislation is being rushed through without the full consideration such policies deserve. Thanks to more shenanigans, it looks like taxpayers are about to get burned.
The new bill at hand is S. 953, which would amend the Higher Education Act of 1956 to extend reduced interest rates for Stafford loans. While it’s old news that college graduates (myself included) are often saddled with large student loan debts, further extending the below-market interest rate of 3.4 percent won’t fix that problem, and could exacerbate sky-rocketing higher education costs. Federally subsidized student loans distort the loan market; inflating the price of college, and encouraging young people to accumulate debt while hiding the risk involved in such transactions.
As I wrote earlier this year in response to the President’s State of the Union Address:
Over the past ten-plus years, the average cost of a year of undergraduate tuition, room, and board at a public university rose 42 percent and the same costs at a private college or university rose 31 percent. Around the same time, federal aid tripled from $10 billion in FY 2000 to $30 billion in FY 2008! Taxpayer-funded subsidies that keep student loan rates artificially low have had the extremely negative impact of both inflating the cost of college degrees and opening the floodgates to a host of students with a higher risk of default or who are ill-prepared for the academic rigors of higher education. These students would have avoided taking on the enormous debt increasingly associated with a college degree where it not for the abundance of cheap credit at taxpayer expense.
Rather than extending the harmful government meddling in the student loan market, Congress should be looking at ways to get out of the higher ed. business. Congress has been taking small, but important steps toward real reform and privatization in a similar area, federal flood insurance, and should consider a comparable path forward for student loans. A good place to start is letting the interest rate go up so that the true costs and risks involved are no longer hidden by price manipulation.
The bill sponsors, Senators Reed (D-RI) and Harkin (D-IA) like to point out that this bill is “fully funded” in order to project an aura of fiscal discipline – but instead of cutting spending to pay for this outlay, they’ve resorted to convoluted tax gimmicks to increase revenues.
It requires time to carefully analyze bills that contain complex policies and employ complicated tax measures. This is why normal order is so crucial. When the regular, deliberate process is ignored, taxpayers can be pretty sure it means bad news.