Congressional Dilemma: Cut Loan Interest Rates
Or Increase Grant Aid?
BY CHARLES DERVARICS
The first Democrat-controlled Congress since 1994 is already struggling with a nagging issue: Whether to focus on cutting student loan interest rates as promised or increasing need-based grant assistance for low-income students.
As Diverse went to press, the House of Representatives was poised to pass a bill cutting student loan interest rates in half, to 3.4 percent over a fiveyear period. But some Senate Democrats want to address interest rates only as part of a larger debate on higher education, and some higher education advocates are sympathetic to that view.
An interest rate cut “is not unimportant,” says Thomas G. Mortenson, an independent higher education analyst and publisher of the newsletter Postsecondary Education OPPORTUNITY.
But cutting interest rates “doesn’t get the money up front, where students need it.”
It’s an argument that may pit lowincome students against their middleincome counterparts. While rate cuts help those already enrolled in higher education, needbased aid could help convince more lowincome students to consider college in the first place.
After making the interest rate cut a major part of their early agenda for the 110th Congress, House Democrats have acknowledged that the goal is a costly one. Their current plan would cut interest rates to 3.4 percent — but only gradually over a five-year period.
