The Student Loan Debate Is About the Wrong Issue

The Washington Post editorial board took a cue from Jason Delisle and our Federal Education Budget Project when, citing his work, they wrote yesterday that they hope Congress does not extend student loan interest rates at 3.4 percent for another year.

Even though it's the much talked about issue that President Obama and Mitt Romney both agree on, Delisle has been out in front arguing it's the wrong thing to be focusing on. Extending the 3.4 interest rate on some government student loans for one year before they revert back to 6.8 affects a relatively small number of students, Delisle has pointed out. A much bigger educational impact would be felt by putting the resources into the Pell Grant program.

As The Post puts it,

Keeping the federal rate extra-low would be less a concern if it didn’t risk encouraging runaway higher-education costs. Most important, spending those billions would be better policy if hiking student loan subsidies was the best way to get aid to the neediest students.

The best way is Pell Grants, which unlike the loans go only to the poorest students and which are more in need of funding. Mr. Obama has enlarged the program but, as Mr. Delisle points out, has failed to show where he’d get the money to keep it at current levels, as the program faces a roughly $7 billion annual shortfall after 2014.