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What Does the Student Loan Drama Really Mean for College Access?

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So unless you've been living under a rock, you know that the main education issue dominating Congress—and Washington—isn't sequestration cuts or renewing the No Child Left Behind Act ... it's student loans. Why should the politics here matter to folks who focus on the lower end of the P-20 spectrum? And how big a deal is it for college access that student loans have already doubled (and may stay doubled), now that the most recent effort by Senate Democrats to keep rates at 3.4 percent has fallen flat?

Here's a rundown:

What has happened so far? Short answer: Months of inside baseball and congressional sparring that has yielded no actual solution. Rates on new, subsidized student loans officially doubled to 6.8 percent on July 1.

OK ... What's the longer answer? Way back in the spring, the Obama administration (which had been all about keeping college loan rates at 3.4 percent back when the president still had to face re-election) put forth a budget proposal to tie student loan interest rates to market forces (specifically the 10-year T-note). That idea was much, much closer to what congressional Republicans (including U.S. Sen. Lamar Alexander, the top Republican on the Senate education committee, and U.S. Rep. John Kline, R-Minn., the chairman of the House Education committee) wanted to see than what many congressional Democrats favored.

Advocates for students were less than enthused with the administration's proposal. But House Republicans were a lot happier with it, and passed their own bill earlier this year, which borrowed a lot of ideas from the administration.

Senate Democratic leaders, however—including Sen. Tom Harkin, D-Iowa, the chairman of Senate Health, Education, Labor, and Pensions Committee— were not fans of the plan. They would generally like to keep rates at 3.4 percent and then work out a longer-term solution through the Higher Education Act (which is up for renewal.)

Another group of Democratic Senators, including Sen. Joe Manchin, D-W.V., worked with Alexander and other GOP senators on what the group billed as a sort of middle-ground deal. (Details of it here). But Harkin and Sen. Harry Reid, the majority leader, are not on board (and neither are many student groups). This has lead to some super-wacky optics on Capitol Hill, with Democrats publicly arguing with Democrats. Great recap for you Inside-Baseball fans here.

Wow, that sounds like a lot of drama. Congress really is broken, huh? Yup. And that doesn't bode well for other big things, like renewing the NCLB law or stopping the cuts to school districts through sequestration. And it's telling that the Obama administration couldn't get most Senate Democrats on board with its plan.

Okay, that's politics, but how much does this really and truly matter for college access? Maybe not as much as you might suspect. "I don't think it will have a significant impact on the number of students that enroll in college," said Kevin Carey, the director of the education policy program at the New America Foundation, a think tank in Washington. "My sense is that people are making choices based on some combination of the 'sticker price' of college and what they can afford while they're in college ... I suspect interest rates are not way up there in the reasons" people decide to pick a particular college.

So exactly how much money are we talking here?: Tuition at the University of Maryland in College Park is about $8,000 annually. If a student borrowed that amount through a subsidized student loan, the difference between a 3.4 rate and a 6.8 rate is about $13 a month, according to this absolutely amazing calculator created by the smart folks at New America. That's less than the cost of a premium Netflix subscription (where you get both the DVDs and the online watching). Of course, the cost can get much higher at private colleges, or if students take out loans for room and board. And it's about $2,000 over the life of the loan. Not chump change for most folks, but probably not enough to make the difference between going to college and not going.

So why is Congress putting so much focus on loan rate? It's one of the few areas of college costs that federal lawmakers can control, Carey explains. "It is unfortunate that this is the only high-profile conversation that we're having when it comes to access in higher education," he said. "The reason that this issue has become so politically potent is that so many people are borrowing so much money to go to college. The interest rate doesn't change that. ... Making the pain of repaying your loan a little less painful is curing the symptom, not the disease," he said. "The pain is the runaway price of college, and no one is talking about how to change that."

Photo: Prospective students tour Georgetown University's campus on Wednesday in Washington. The defeat of a student loan bill in the U.S. Senate on Wednesday clears the way for fresh negotiations to restore lower rates, but lawmakers are racing the clock before millions of students return to campus next month to find borrowing terms twice as high as when school let out. (Jacquelyn Martin/AP)

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