Traverse City Record-Eagle

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May 19, 2012

Freezing loan rates bogus

It may seem strange for a newspaper in a town with two colleges to take this position but we believe the political wrangling in Washington over student loan interest rates is a bogus issue.

In case you aren't tuned in to the latest great debate, it concerns a projected increase in the interest on new Stafford student loans from 3.4 percent to 6.8 percent.

This issue is perfect for election year campaigning, as shown by the fact that President Obama is leading the charge to hold the rates at 3.4 percent for another year.

First and foremost, what's so bad about 6.8 percent when the Federal Reserve's benchmark interest rate is roughly zero and home mortgages are going for less than 4 percent?

Let's face it. Student loan rates are where they are because they're high risk.

Students put up no collateral that a lender could repossess if the borrower defaults. No one, thank goodness, has figured out how to repossess an education.

The worst part of student borrowing is that about 23 percent of those with subsidized Stafford loans simply walk away and stop making payments.

Private lenders charge higher rates because they take higher risks. It can be 12 percent or more ...

In our opinion, Congress should be more concerned about the $1 trillion now owed in student loans.

It is costing about half that much to bail out Fannie Mae and Freddie Mac and they aren't college students.

The Morehead News Morehead, Ky.

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