Congress Watch: Senate's Student Loan Bill Wrong Way to Get Graduates Out of Debt

Ask anyone who has had to pay for one recently and they’ll tell you the same thing – the cost of obtaining a college education is soaring. For decades, prices associated with going to college have been rising faster than inflation. So, last week, the Senate put aside its work to ensure that our nation’s veterans have access to the medical care they need to consider legislation to make college more affordable for students who have already graduated.

Forty million Americans hold approximately $1.2 trillion in student loan debt currently.  According to Senator Lamar Alexander (R-TN), undergraduate students account for 85% of all student loan debt, owing an average of $21,600. The typical student who graduated with a four-year degree owes about $27,000.

Despite all of this debt, a college education is still one of the best investments an American can make. According to the Census Bureau, a college degree is worth an extra $1 million in salary over an individual’s working lifetime.

Last year, Congress enacted legislation that lowered interest rates on all new student loans for undergraduates. That law, however, does nothing to lower the interest rates for those who hold older student loans. The “Bank on Students Emergency Loan Refinancing Act” would allow holders of older loans – whether privately held or federal – to refinance at a lower rate (3.8% for undergraduate loans) with the federal government. The Congressional Budget Office estimated that the bill would cost approximately $52 billion and that cost was offset through tax increases.

The Obama administration thought the bill was a good investment. According to its numbers, the legislation could have saved student loan holders around $2,000 over the life of their loans. While that might sound good, the practical effect is far different.  Sen. Alexander put it in perspective: the bill would actually provide borrowers a grand total of $1 per day.

As has been typical in this session of Congress, the Senate has once again considered legislation that would provide paltry relief for the symptoms of a poor economy. The fact is that the best way to help those who hold student loan debt is through a good job.  According to a 2014 Accenture Strategy report, “46% of 2012/2013 graduates working today report that they are underemployed,” and “13% have been unemployed since graduation.”

Fortunately, the Senate failed to obtain cloture on the Bank on Students Emergency Loan Refinancing Act. There are better alternatives to easing the burdens of student debt. A growing economy would be the best start.