By Seung Min Kim of Politico.com
The partisan clash over extending low student loan interest rates underscores a dilemma Congress faces as it considers a myriad of options in the coming year to control rising college tuition costs.
Lawmakers want to help. They just don’t have the money.
At a time when more than 37 million are burdened by college debt, Congress faces the challenge of tempering the blow of rising tuition to students and families while budget realities mean there’s little they can do to directly ease the burden on wallets and bank accounts.
“It’s very clear that as the economy recovers, the states are going to have to step up and provide additional support because I think we’ve provided all the assistance that we’re going to be able to provide for the foreseeable future,” said California Rep. George Miller, the top Democrat on the House Education and the Workforce Committee.
“I don’t think Congress can do a lot except to insist on more transparency” in higher-education costs, said Rep. Virginia Foxx (R-N.C.), who chairs a subcommittee with jurisdiction over colleges and universities.
In a political skirmish that has characterized the 112th Congress, lawmakers are currently wrestling with how to fund a student loan interest rate extension that affects more than 7 million people and has become a top priority for President Barack Obama.
But the bigger question is what comes next.
Capitol Hill will begin exploring the options to control college costs next year, when lawmakers begin to work on reauthorizing the Higher Education Act, a wide-ranging piece of legislation that sets federal policies and aid concerning colleges and universities. It’ll be a significant undertaking that won’t be easily completed; the last reauthorization effort, which began in 2003, wrapped up five years later.
States are cutting down,” Harkin said. “They’re cutting back on their support for our regents universities, and then that puts more of a burden on the federal government to come in with research dollars and whatever else we can do to help the schools out.”
A battle could also brew between parties on the broader issue of federal student loans, with Republicans calling for a market-based system that would set student loan interest rates or having the federal government leave the loan business altogether.
“In the past, we’ve seen from the private sector that they really work with the students to make sure that they’re going to be able to handle this loan to know what they can afford,” said Rep. Judy Biggert (R-Ill.).
Republicans also pointed to increased federal mandates — such as the expanded Medicaid programs under the 2010 health care law — that are taking money away from the states that could otherwise be used to fund higher education.
“It’s destroying our public colleges and universities,” Sen. Lamar Alexander (R-Tenn.) said of the mandates. “It’s driving up tuition, and President Obama did not start this train, but he’s made it much worse.”
Alexander, who was education secretary under President George H.W. Bush, said he will also push to remove more regulations from colleges and universities when the debate over the reauthorization of the Higher Education Act comes up next year. The GOP-led House has already gotten started on that with votes earlier this year to repeal two federal rules on higher education: one that defined a credit hour and another that set out guidelines that states must follow when giving permission for schools to operate.
Other lawmakers are envisioning an even broader overhaul starting next year.
“I really think that we’re at a point where you have to have very serious thoughts to rethinking the operation of the higher-education model,” Miller said. “It’s a number of different missions, but how do those missions get accomplished, and how do we get them accomplished in this day and age?”
Meanwhile, the cost crisis for college students continues to escalate with no stop in sight.
A May 31 report from the Federal Reserve Bank of New York showed that as of the first quarter of this year, borrowers carried $904 billion worth of student debt and was the only type of debt to “substantially increase” since late 2008, according to Fed economists. Other numbers go even higher — in its estimates, the Consumer Financial Protection Bureau has warned that the total outstanding balance for federal and private student loans has already passed the $1 trillion mark.
The New York Fed recently said the average outstanding student loan balance is about $23,300 per person — while the Department of Education says nearly 9 percent of student borrowers defaulted on their loans in fiscal 2009, the latest available data.
In the states, cash-strapped legislatures have repeatedly slashed funds for state universities and colleges while upping tuition to make up the difference. State funding for public institutions dropped 18 percent per student between 2007 and 2011, according to the College Board — a problematic set of data at a time when 80 percent of students attend public institutions.
“Congress has thought about steps that they could take to moderate tuition increases and has concluded that they don’t have very many good handles,” said Terry Hartle, senior vice president of government and public affairs for the American Council on Education. “They don’t have a good way to get a handle on the problem. Federal student aid goes to the student, and the student decides where to go.”
Hartle said the best thing lawmakers could do to ease the cost of higher education would be to take all available measures to boost the economy to leave state governments in a better position to fund higher education. In the short term, Hartle added, Congress also needs to extend the federal student loan interest rate.
But whether that will occur by the end of the month is still up in the air.
Lawmakers still haven’t come to an agreement on how to pay for a one-year extension of the current interest rate on subsidized Stafford loans, which will rise to 6.8 percent without Hill action before July, costing an average student an extra $1,000 over the life of the loan.
The House voted to drain nearly $12 billion from a health care prevention fund to pay for the extension — which is dead on arrival to most congressional Democrats and the White House — while Senate Democrats tried to close a tax loophole on Subchapter S corporations, which Senate Republicans blocked.
The top two Republican leaders in each chamber have offered a new collection of offsets to help pay for the estimated $6 billion cost of the rate extensions. Democrats have dismissed the offer, but Senate Majority Leader Harry Reid (D-Nev.) came back with another proposal late last week that Senate Minority Leader Mitch McConnell’s office said could signal progress.