Student loan interest rates

Updated: Saturday, August 3, 2013
Student loan interest rates story image
KALAMAZOO, Mich. (NEWSCHANNEL 3) - The numbers are staggering--of the 7 million or so students going to college in this country, 66 percent of them are on campus thanks to borrowed money.

With the failure of Congress on Wednesday to face down a problem that it knew was coming for a long time, the interest on new student loans has doubled.

Tonight in Tom's Corner, Tom Van Howe says our government not only doesn't see the little picture, it can't even imagine the bigger one.

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I understand that the men and women who make the decisions in our congress have a lot of work to do. I get it.

But it's gotten to a point where if something is truly important—it just doesn't get done.

It's embarrassing that the Senate knew for a year—a full year—that if it didn't do something, the cost of student loans would, on July 1st, go up.

So what did it do? It went home on vacation.

And guess what; interest rates went up from 3.4 percent to 6.8 percent.

Hello?!

Then yesterday, the votes weren't there to come up with a temporary fix. No surprise. There were Senators looking for a permanent fix. They knew that going in.

Nonetheless, there was a lot of breathless posturing; a charade, if you will, to convey just how hard they were all working.

I don't think the rate will stay that high for very long. For one thing, it's bad politics. It could mean votes!

But what's missing is real conversation about the bigger picture.

I think we can all agree that the need for higher education has never been greater than now. The high-school-to-factory  syndrome is long gone.

Even those jobs now require more than high school can provide.

Continuing education is crucial to the future of our country. Its no longer a matter of "it would be nice," it's a matter of "we have to."

Trouble is, the cost of college and specialized training schools is cold-bloodedly expensive—up about 500 percent over the past 25 years. The cost of text books has tripled over the past ten years.

More and more moms and dads find it impossible to pay as they go, so two-thirds of all students now borrow to attend class.

Students can no longer pay their way with a part time job.

And the average student graduates with a debt of $28,000. But there are tens of thousands of students who graduate with  debt of up to $200,000 dollars.

Right now, Americans owe more than a trillion dollars on student loans. The second highest kind of consumer debt out there behind the mortgages.

And now for the hammer.

Lest you think students loans cost us money—last year, according to the government accounting office, the U.S. government collected $51 billion in interest payments. Fifty-one billion dollars!

Why in the world is the U.S. government making that kind of money off students who have yet to land a job?

A few months ago, freshman Senator Elizabeth Warren, of Massachusetts, suggested it might be wise to lower student loan interest rates to below one percent—the same rate that banks pay the federal reserve for short-term loans.

So simple, so reasonable, so doable.

But then—we're talking about Congress.

Making college degrees and technical certificates more affordable should be a national priority.

We need young graduates to be strong, competitive, and dynamic, just as the United States needs to be strong, competitive and dynamic.

The accumulating student debt is a drag on our economy—just think about how far those billions in interest payments could go in a world of starter houses, cars, and small business loans.

We've got lots of problems with higher education in this country. But setting a truly low, fixed interest rate, to encourage ambitious young people, instead of adding to their burdens, is a part of the answer.

Think about it.

In this corner...I'm Tom Van Howe.

Business News

Last Update on September 23, 2014 08:16 GMT

CHINA-MANUFACTURING

HONG KONG (AP) -- Growth in China's sprawling manufacturing industry unexpectedly ticked higher in September, easing concerns about the No. 2 economy's recovery.

HSBC's purchasing manager index edged up to 50.5 this month from 50.2 in August, based on a 100-point scale. Numbers below 50 indicate contraction.

Analysts had expected the reading to fall for a second month, dragged down by the slumping property market.

The modestly upbeat number comes after an official report earlier this month showed China's factory output slowed sharply in August, which sparked fears momentum was fading and prompted some analysts to lower their full-year economic growth forecasts.

China's economic growth edged up in the April-June quarter to 7.5 percent after policymakers rolled out a batch of relief measures aimed at areas including railways and public housing. But analysts say further increments in growth will be hard to achieve without more government spending.

CALIFORNIA DROUGHT

LOS ANGELES (AP) -- Officials say the giant wholesaler that provides drinking water for half the California population has drained two-thirds of its stored supplies as the state contends with a punishing drought.

Without plentiful rain and snow in coming months, the Metropolitan Water District of Southern California could consider cutbacks to its regional distributors next year. If such limits are approved, that could lead to rationing or cuts for households in portions of Southern California.

At the current rate, billions of gallons in remaining agency reserves could be exhausted in about 18 months. The agency built up those reserves over time as a hedge against the state's periodic droughts.

But those supplies have tightened as the state has experienced a combination of sparse rainfall and unusually warm temperatures -- 2014 is on track to be the hottest year in California since record-keeping began over a century ago.

Gov. Jerry Brown, who declared a drought emergency earlier this year, is urging residents to voluntarily reduce water use.

NETHERLANDS-PHILIPS

AMSTERDAM (AP) -- Royal Philips NV says it will spin off its lighting division and the rest of its operations into two separate companies, continuing a radical reshaping of one of Europe's best-known corporations.

Tuesday's announcement follows the decision in June to spin off its lighting components arm, and it is no longer clear whether Philips is the world's largest lighting manufacturer, though it is a leader in cutting edge LED lighting technology

Chief Executive Frans van Houten said the company's consumer division -- which makes a range of household products such as coffee makers and shavers -- and its health care division will operate as a single "HealthTech" company. Both the lighting and HealthTech company will continue to use the Philips brand.WALL STREET-PROTEST

NEW YORK (AP) -- More than 100 people have been arrested in a sit-in protest in Manhattan's financial district in New York.

More than 1,000 activists blocked parts of Broadway Monday to protest what they see as the roles of corporate and economic institutions in the climate crisis.

The sit-in followed Sunday's march in which more than 100,000 people warned that climate change is destroying the Earth.

OVERSEAS TAX BREAKS

WASHINGTON (AP) -- The Obama administration is cracking down on American companies that are trying to reincorporate overseas to avoid paying U.S. taxes.

In a so-called "tax inversion," a U.S. business merges with or is acquired by a foreign company in a country with a lower tax rate.

The Treasury Department says it's putting forward regulations that will make inversions less lucrative by barring some of the techniques companies use to defer their taxes. It's also making it harder for companies to pursue an inversion by tightening the requirement that the company's former owners own less than 80 percent of the new company.

Treasury Secretary Jacob Lew says the steps will ensure that it's no longer financially beneficial for companies to use that tactic.

The new measures will take effect immediately.

DETROIT WATER SHUTOFFS

DETROIT (AP) -- Detroit's water department is defending its policy of cutting off service to people with unpaid bills. It says continuing to provide free service to those households could be "very devastating" to the department's budget.

An attorney for the water department told a judge Monday that "humanitarian concerns are very compelling," but that so is fairness.

After thousands of shutoffs earlier this year, there were protests and appeals -- including one to the United Nations.

The judge hearing the city's bankruptcy trial set aside that case Monday to hear evidence in the water controversy. A coalition representing low-income residents is asking the judge to suspend water shutoffs, and to restore service to people who have lost it.

The attorney for the water department said it would be violating state law, and breaking agreements with bondholders, if it's forced to supply water and ignore bills that are overdue.

An economist who testified on behalf of critics of the water shutoff policy said a consumer's income should be a factor in how the city regularly collects water bills.

The hearing will end today after testimony from water department officials and closing arguments.

MEXICO-MINING SPILL

CANANEA, Mexico (AP) -- Authorities in northern Mexico have issued a binational alert over contamination from a copper mine that spilled into a waterway that flows into Arizona.

Carlos Jesus Arias is director of the Sonora state civil protection agency. He says contamination from the Buenavista del Cobre mine in the city of Cananea has made it into the San Pedro River.

Officials haven't said how much leaked, or what was in the contaminants.

The mine is operated by Grupo Mexico. It issued a statement Sunday saying storm water overflow linked to the recent passage of Hurricane Odile (oh-DEEL') caused mine water to leach into some creeks and streams.

Civil protection officials are urging residents to avoid using the local water.

SEC-WHISTLEBLOWER AWARD

WASHINGTON (AP) -- The Securities and Exchange Commission is giving its biggest award yet, about $30 million, to a whistleblower who provided key information that led to an enforcement action in a fraud case.

The agency announced the award Monday. It was the SEC's 14th whistleblower award under a program adopted in 2011 and the fourth award to a whistleblower living in a foreign country. The nature of the enforcement action and the identity of the whistleblower weren't disclosed.

Under the program, tipsters who report corporate fraud or other misconduct are eligible if they give the SEC information that leads to an enforcement action resulting in more than $1 million in penalties. They can receive from 10 to 30 percent of the money the SEC recovers from a company or person.

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