In the latest episode of Congressional Groundhog Day, lawmakers are caught once again in a partisan stalemate with time running out. This time, the interest rate on the most popular form of student loan will double if Congress fails to act by July 1. That's an outcome no one wants. The twist is that, instead of picking another fight with Democrats over how to cover the cost of the program, Republicans are backing a long-term solution that's similar to one President Obama proposed in his latest budget. Obama and his fellow Democrats, however, are now holding out for a more comprehensive deal that addresses other higher-education programs.
There's a compromise within reach that will put the loans on more sustainable footing without turning them into a profit center for the federal government. Rather than postponing the day of reckoning, lawmakers should move to the obvious middle ground.
With tuition and student debt climbing, Congress agreed in 2007 to give college and graduate-school students a better deal on government-issued loans. Instead of adjusting interest rates every year to reflect the ups and downs in the market for government bonds, they fixed the rate at 6.8%. And for lower-income students who qualified for subsidized loans (that is, loans with no interest charges until six months after the student leaves school), they lowered the rate gradually to a rock-bottom 3.4%. But to reduce the measure's cost, the interest-rate cut applied only to loans issued before June 30, 2012.