College students are drowning in debt, and keeping student loan rates low won't be enough to save them.
Last week, President Obama urged Congress not to let government-backed student loan rates double; unless the House and Senate act by July 1, student loan interest rates will jump from 3.4 percent to 6.8, adding an average $1,000 of debt for every college student.
President Obama is right, but he's only telling half the story. A 6.4 percent rate is pretty bad, but it doesn't compare to the 28 percent interest rate that some private student loan companies force students to pay. And while $1,000 is a lot of money, it's only a drop in the bucket for the average student, who owes over $35,000 in loans. For thousands of students and recent graduates, things are bad in a way that a lower subsidized loan interest rate isn't going to fix.
That's because young people owing money is big business to lending giants like Sallie Mae, which started out as a government agency but was privatized into a for-profit corporation. Thanks to Sallie Mae's predatory practices, Caltech grad Alan Collinge owes over $100,000 on the $38,000 loan he needed to graduate. And he's not alone" there are thousands like him, and dozens of them in every state are sharing their stories.
Companies like Sallie Mae are using the money they extract from college students to buy influence in Washington. Through their political action committees, they gave over $250,000 last election, and have donated over $120,000 to House Speaker John Boehner alone since 1989. In return, Congress has given Sallie Mae financial bailouts, lax regulation, and little oversight. With so much campaign money floating around, Congress has little interest in easing the burden on students, either from public or private loans.
But people are catching on to Sallie's agenda. Last month, Common Cause and our coalition partners led a major demonstration at Sallie Mae's headquarters in Delaware, demanding disclosure of their lobbying expenses and an end to their predatory practices. We're working in Washington and at the local level to make education a source of endless inspiration for students, not a source of bottomless debt.
At his press conference, President Obama urged Americans to call their representatives and demand they keep interest rates low. It's a good idea" but while you're on the line, remind your congressperson that he or she works for you, not for corporations.
Office: Common Cause National
Issues: More Democracy Reforms