The ‘Subsidized’ Loan Charade: US Government Profits from Struggling Students

Published on Thursday, May 10, 2012 by ThisCan'tBeHappening.net
The ‘Subsidized’ Loan Charade: US Government Profits from Struggling Students

by Dave Lindorff


The Senate is currently deadlocked on taking action to prevent the interest on new Stafford guaranteed student loans from rising on July 1 from 3.4% to 6.8%, with Democrats saying they want to “pay for” keeping the current “lower” 3.4% rate by closing a loophole that allows some wealthy people to avoid paying Social Security and Medicare taxes, while Republicans want to “pay for” keeping the lower rate by eliminating a fund for preventative health care in the 2010 health care reform law.

But what is all this nonsense about “paying for” a supposedly “lower” interest rate of 3.4%?

There are actually two kinds of Stafford loans: subsidized and unsubsidized. The unsubsidized loans, and Stafford loans taken out by graduate students, already carry a whopping -- some might say usurious -- 6.8% interest rate. It’s only the so-called “subsidized” loans that carry a 3.4% rate, and it’s only those loans that would see their rate rise if the two parties cannot come to an agreement to extend the “subsidy.”

But what subsidy are they talking about, anyhow? .................(more)

The complete piece is at: http://www.commondreams.org/view/2012/05/10-4