Well, we've finally hit student loan D-Day. Thanks to Congress's failure to broker some sort of compromise that would have averted a hike, the interest rate on new subsidized Stafford loans is officially doubling from 3.4 percent to 6.8 percent, which will add as much as $39 to some borrowers' monthly payments.
Both parties have been keen to stick each other with the blame for this turn of events. Unfortunately, some Republicans seem to have settled on a particularly vacuous line of attack, which former George W. Bush economic advisor Douglas Holtz-Eakin has spun out into a astoundingly misleading column for Reuters today. "Obamacare was paid for on the backs of students," he claims, so it's Democrats who are rooting for higher rates? Here's Holtz-Eakin:
You may remember that Obamacare staggered over the legislative finish line in 2010 with $19 billion in profits from changes to the student loan program. The changes included nationalizing federal student lending and setting loan interest rates high enough to generate profits to cover the healthcare costs.
Monday, President Barack Obama and the Democratic-led Senate again put their their political and legislative priorities ahead of students and allowed their loan interest to double.
This is an absurd vision of recent history that many Republicans, including Senate Minority Leader Mitch McConnell, have embraced. It conveniently ignores what the student loan reforms included in the health care bill actually accomplished: Saving billions by ending subsidies to big banks.
When the Affordable Care Act passed in 2010, the legislation put a merciful end to what was known as the Family Federal Education Loan program. This was a costly policy relic in which the federal government guaranteed student loans made by private financial institutions, while paying them handsome fees ostensibly meant to cover administrative costs. When students defaulted on their debt, taxpayers covered 97 percent of the losses, but the profits went to the lenders. We got the risk. Wall Street got the reward.