Updated below:From the Des Moines Register:
Rebecca Wilson has waited tables, washed dishes, baked cookies and worked as a chemistry lab assistant to pay for college.
The University of Northern Iowa senior will still graduate with about $12,000 in student loan debt. Wilson supports a proposal from Democrats in Congress that would save future college students more than $4,000 a year in interest in need-based loans...
...Democrats plan to propose legislation this week cutting interest rates in half on subsidized Stafford undergraduate loans, from a fixed rate of 6.8 percent to 3.4 percent by 2011.
The proposal - one of a handful of issues Democrats have vowed to raise in their first 100 hours in session - would affect more than 50,000 Iowa undergraduates who took out subsidized loans in 2004-05 and about 5.5 million students nationwide, according to the U.S. Public Interest Research Group.
Once fully implemented, these cuts will save the typical borrower - with $13,800 in need-based loan debt - approximately $4,400 in interest costs over the life of the loan.
"It clearly makes college more accessible," said U.S. Rep. Dave Loebsack, a Democrat from Mount Vernon.
Financial barriers will prevent at least 4.4 million high school graduates from attending a four-year public college over the next decade, and prevent another 2 million high school graduates from attending any college at all, Loebsack said
With all the ways to save for college available over the past couple of decades: mutual funds, UGMA/UTMAs, 529s, pre-paid college tuition, and so on, I find it difficult to believe that cutting the interest rate on student loans is going to make college more "affordable" to some kid.
I think most parents are just a bunch of selfish bastards who can't be bothered to save a single dime for their children's college tuition. And they justify it with bullshit statements like, "Well, I had to work and take out loans myself...." I have no problem with teaching a child about sacrifice, but if the end result is 15 to 30 years of $300-to-400+ a month student loan payments then I don't think it's a wise idea in the long term.
Sure, the rich can write a check and send their kids to whatever school, but what about the working poor or the middle class??? Well, are you deaf? I was just talking about how parents have
mutual funds, UGMA/UTMAs, 529s, pre-paid college tuition, and so on, at their disposal today. Sure, 529s have been around for roughly a decade, and pre-paid college tuition is a more recent scheme, but everything else has been around, in one form or another, for years. You've got 18-23 years to save for junior's college. If you can't save a dime over that course of time then you're lazy, selfish, or just plain stupid about money. And you probably hate or resent your kids.
Update:Common Iowan
replies:
State 29 disagrees with this legislation and basically says that if people take out students loans then they are too stupid to realize they need to save for college. State 29 completely ignores the fact that tuition has doubled over the past 5 or 6 years while income for middle class families have been stagnant. These families could have been saving for college, but when tuition increases so fast over such a short period of time, the only thing that can be done is to take out loans. This legislation helps ease the burden of the loans.
This legislation is just a bandaid attempt to solve the issue of student loan debt. The real issue is the dramatic increase in college tuition and decrease in state funding for higher education. This will continue to be a problem until we make the decision that it is important to have affordable college education and invest in our future.
I do not disagree with this legislation. Actually, I wholeheartedly support it. Anytime interest rates can be cut,
I'm on board for that. The problem I have is that politicians are selling this as a way to make college more "affordable", which is sort of like saying that buying a new 12 mpg Ford F-150 pickup with 4 doors, leather, and V8 engine is going to
save you $5900 in interest over the next 84 months while you pay off the $35,000 price tag.
The other problem I have is that funding of a child's college education should primarily be the responsibility of the parents. I can't tell you how many parents I've encountered over the years who refuse to save any money for college. You should hear the excuses!
Oh, little Johnny is smart, he'll get scholarships. Mary will get an athletic scholarship. We'll just worry about it then. They won't appreciate it as much if we pay for it. My parents didn't save for me, so why should I save for them? It's obnoxious. These are probably also the same people who are in debt hell for buying new homes with new furniture and new cars and new shit all the time. Or they have an ex-wife and ex-kids to support.
As far as the price of tuition going up, 529s are a way to help temper the increases in tuition. The College Savings Iowa's Aggressive Growth fund, around for about 5 years,
has an annual rate of return of just over 11%. Expect to see these type of long term returns rise over the next few years as the dot-con crash days of 2001-2003 disappear over time. Over the course of a child's first 18-to-22 years, you should see performance in the 8% to 12% range for balanced, index, and growth funds. It's better than nothing. It's certainly better than saddling junior with debt until he sees gray hairs.
Finally, and this is pointed at the politicians,
there is no correlation between tuition costs and enrollment numbers. Don't lie to us and say that rising tuition rates are hurting the number of people wanting to attend college because it's just not the case.
Related: On Higher Education And Debt