ncreasing attention is rightly being paid to a scheduled increase in student loan interest rates in less than a month. We should also be concerned about threats down the road. Regardless of how the current situation is resolved, if action isn’t taken to fix the debt student loan rates could rise and today’s graduates could face other problems affecting their quality of life.
On Friday, President Obama called for action to prevent interest rates on student loans from doubling to 6.8% on July 1. There is general agreement that something must be done to prevent such an abrupt and steep increase although, predictably, there is little agreement on how to do so. The House of Representatives has already passed a bill that the White House has criticized while the Senate plans to consider legislation this week. The inability of policymakers to agree on a solution to this near-term problem underscores how difficult it is to achieve compromise on a long-term national debt plan. But crafting such a plan is required to create a better future for graduates.
Failure to fix the debt can cause interest rates to rise, resulting in higher student loan rates, not to mention higher rates on home, auto and credit card loans. The debt could also affect job availability and wage growth. Jevin Hodge, a member of our millennial arm, The Can Kicks Back, laid out some of the challenges in a recent article. He also wrote on what a solution should look like.
A solution to our fiscal imbalance requires a generationally balanced deficit reduction agreement. This agreement should couple structural changes in entitlement programs that slow spending and pro-growth tax reforms that raise additional revenue. At the same time, it is important that crucial investments in our future such as education, infrastructure and research — which have already shouldered a disproportionate amount of cuts — are protected. These are the kinds of investments that will help grow our economy and keep our country competitive for generations to come. A deal on the debt between both parties can help spur confidence, increase investment and create jobs.
The Can Kicks Back is hosting a special “tele-commencement” address on Tuesday at 9:30 am ET with Purdue University President and former Indiana Governor Mitch Daniels. Learn more details here.
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