IE 11 is not supported. For an optimal experience visit our site on another browser.

The root of the student-loan problem: Not the fight over rates, but spiking tuition

President Obama reignited the debate on how best to deal with student loans on Friday, beginning his push to keep interest rates on loans low.

President Obama reignited the debate on how best to deal with student loans on Friday, beginning his push to keep interest rates on loans low.

He called the debate "deja vu all over again." And it is. During the election, Obama pressed Republicans to postpone the student loan rate spike for twelve months. Now, with the July 1 deadline looming, more than 7 million college kids will see their federal student loan rates double unless an agreement can be reached to avert the spike, which would push rates up from 3.4% to 6.8%.

The House has passed a student loan bill that will adjust rates in accordance with where the markets are. But President Obama called their plan "not smart" because it doesn't lock down low rates and "not fair" to lower income students. Democrats, on the other hand, want to lock in the rate in order to ensure it is kept low.

But while politicians debate talking points, Matthew Segal, president and co-founder of, is talking about how these plans affect the students they're designed to help. The Republican plan, with its variable rates, will make it more difficult for students to plan their payments, he explained. "One year you're gonna have a 3% type of interest rate, the next year you're at 7%, the next at 6%." The White House-endorsed plan would fix rates and allow for payment planning in that "one year they're gonna take out a loan at a certain percentage and they know what they can expect to pay back."

The major affront, explained by Ari Melber, is this: "You’re literally adding to the debt of students who have responsibly tried to go to school, take out some money, and pay it back–you’re adding to that debt to pay off the long term debt." Segal called the notion that Congress wants to massively burden a generation saddled with education debt to pay off a growing federal deficit "offensive," noting that under the Republican plan, the money would not be put back into education programs such as the Pell Grants and income based repayment programs.

But the student loan issue is only a small piece of the larger budget debate. The true problem lies in the fact that college costs are skyrocketing. And while tuition is rising, it's not necessarily for the right reasons. "[Colleges] rise in tuition for prestige, but they don't necessarily go into the cost of learning," Segal said.

While many hope for consensus before the deadline for rate spikes, Segal is not inspired by Washington's continued track record of dysfunction. As he sees it, the proverbial education can will be kicked down the road just a bit longer, the 3.4% rate extended for another year, "and then open up a larger debate." In a time when we need sustainable solutions, a compromise on student loans would be a good way for Congress to start a new trend.