Student-loan deal shows the system works

The student-loan legislation that President Barack Obama signed last week was a reminder that Republicans and Democrats can still lay aside their differences and get things done, says Leslie Lenkowsky, a professor of practice in the IU School of Public and Environmental Affairs.

And at a time when the public and politicians are sharply divided over the roles the federal government should play, maybe that’s something to celebrate.

Leslie Lenkowsky

Leslie Lenkowsky

“We sometimes forget our system of government is not created to make a more perfect universe,” Lenkowsky said. “But we have a government that is accountable to the people and that is capable of making small but important changes in public policy.”

Interest rates on federal Stafford loans had doubled, to 6.8 percent, on July 1 because Congress hadn’t been able to agree on extending the federal subsidy program. But a bipartisan group worked out a compromise that ties future loan rates to rates on 10-year Treasury bonds.

Rates can rise in the future, but for this fall, they will be 3.9 percent for undergraduates, 5.4 percent for graduate students and 6.4 percent for parents. The White House says the deal it will save an average of $1,500 in interest payments for nearly 11 million borrowers.

The legislation bridged the gap between Democrats who wanted to do more to promote college access and affordability and Republicans who fretted about the cost and questioned whether the government should be so deeply involved with college loans.

Lenkowsky said it’s true that the deal leaves unsettled many political and philosophical questions about financing higher education. But the rising cost of student loans is a significant issue, he said, with college indebtedness having surpassed credit-card debt in the U.S.

And yes, it took a crisis – a doubling of interest rates – for Congress to act. “But that again is part of democracy,” he said. “You’d like to think government could anticipate these things and it wouldn’t take a crisis. But that’s not particularly new. And at least they dealt with it.”

Lenkowsky, who served as CEO of the Corporation for National and Community Service in the George W. Bush administration, believes a similar compromise could be reached on immigration reform.

“The guessing right now is that they will pass a bill,” he said. “Will it be the end of the debate? No, but that’s not the way democracy works. Democracy is not about solving things once and for all. It’s about making changes in a way that’s responsive to the public.”

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