Student Loans: Why It Matters

By Robert G. Duffett, President

Congress just adjourned for vacation and, for the second time, “punted” on student loan interest rates. American college students were left on the “sidelines.”  The result was a doubling of the interest rate on new student loans from 3.4 to 6.8%.  Historically, student financial aid has not been a partisan or political issue.  Federal financial aid to students began in 1944 with the passage of the GI Bill. Congress was so determined to serve returning GI’s that the Bill passed unanimously in both houses of Congress.  Today, in every town in America, someone- liberal and conservative, black, white, red, yellow and brown, male and female, republican, democrat, libertarian and tea party - benefits from or has a personal stake in college student loans.

Despite Washington gridlock and national media attention, the chief issue of student financial aid is not political or legislative but economic and perhaps moral. Why should the federal government even be in the student loan business? And, should student financial aid  matter to or even merit Congressional attention?  Perhaps we as a society ought to let college students and their families find their own way.

Effective public policy and the possibility of developing one's potential are two foundational reasons student financial aid is important and primarily a social rather than individual good, thus meriting federal support.

The test of time suggests student financial aid is an economic engine that drives upward America’s economy.  For instance, the Veteran's Administration (V.A.), who administrated the GI Bill’s educational benefits for WWII veterans, estimated the cost of the popular GI Bill at $19 billion. Yet, by the mid-1960’s the Department of Labor calculated that alumni of the GI Bill contributed an additional $20 billion in federal taxes due to better jobs courtesy of the Bill. And, by the mid-1960’s these former GIs were only in their middle 40’s. Their best earning years and tax payments to the federal treasury were before them. The lesson from this college student financial aid program should not be missed by our politicians today.  As a public policy issue, student aid increases wealth by developing the intellectual talents of individuals.  The federal government creates or picks nothing. Rather, it supports students individually who pursue the occupation and college of their choice. Generous student aid with thoughtful repayment terms may be one of the federal government’s best deficit fighting measures.

Second, I fear national media attention on this interest rate increase may discourage scores of intellectually gifted students to give up on attending college and their dreams -especially those from economically challenged homes. College costs are rising and the doubling of interest rates does not help. However, recent data is clear; those with a college degree, on average, will make at least a million dollars more in lifetime earnings, experience unemployment at half the rate, and if unemployed will more quickly and easily find employment than those with only a high school diploma.

Last, The Project on Student Debt, an organization concerned about about college availability and affordability, listed the average student loan debt for 2011 graduates of Pennsylvania’s colleges (private and public included) at $29,959 (latest data available).  Assuming the new higher interest rate of 6.4 % (which these students in 2011 were not subject to) the monthly payment on a ten-year repayment plan would be $345.  My car loan (for five years) is $476. As difficult as that monthly payment may be for newly minted college graduates as they try to initiate their careers in a difficult economic market, a college degree still remains the best investment you will ever make. The same is true for those who plan to begin college next month across our Commonwealth.

For the sake of America’s college students, I hope that our Congressional leaders quickly return to Washington and adequately deal with student financial aid. They deserve better.  Until that time I urge our college students to hold on to your dreams. You will receive a great return on your investment and, as a byproduct, your college education and degree will awaken talents unknown and open doors unimagined.

*GI Bill® is a registered trademark of the U.S. Department of Veterans Affairs (VA). More information about education benefits offered by VA is available at the official U.S. government Web site at

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