Opinion: Student loan debate requires clarity

Kevin Griffin

Kevin Griffin

Kevin GriffinIn lackluster economic times, some groups are hit harder than others.

College students often find themselves in this category and student interest rates will double from 3.4 to 6.8 percent on July 1 unless some action is taken, according to The New York Times.

One issue in the student loan debate is that of profit to the government. A Congressional Budget Office analysis showed that the government has a profit of 36 cents for each dollar of subsidized student loans.

This report of great profits by the CBO has become the basis for some student groups to decry the rise.

As much as I would like to join them in condemning the scheduled rise, I and all other college students must face some unpleasant facts about the student loans system right now.

The number given by the CBO may be off, as it derived from an accounting system “prescribed by the Federal Credit Reform Act of 1990,” according to a June 2012 CBO report.

The CBO examined federal credit programs using an alternate system called fair value which, unlike the FCRA system, includes the “cost of market risk” factors, such as the risk involved in guaranteeing loans and changes in the overall economy.

The fair value analysis found that the program adds to the deficit.

I am all for extending educational benefits to as many as possible, but we must acknowledge that the system does, in fact, have problems and should be the target of a substantial reform.

The case for an equitable student loan system should be made, but it should be based on a clear understanding of the reality.

What the best method is for devising a system that cost effectively provides students of all backgrounds with the ability to get an education without incurring deficits, I don’t know.

This issue does, however, present us an opportunity to have something that is far too rare, which is a discussion of an issue that focuses on the clearest, most factual understanding of the matter at hand.

While I am skeptical this will be the case, it cannot be said that the chance was not present.

Griffin, a freshman journalism major from Madison, is the opinion editor.