One would hit the same college students who are benefiting from the interest rate freeze. Though their rates will be only 3.4 percent, they will be responsible for paying that interest as soon as they throw their graduation caps in the air — a change that is expected to cost them more than $2 billion.Until now, the government has covered interest on loans for six months after graduation, giving students a grace period to find a job, pay the security deposit on an apartment, and generally get on their feet. No more. This at a time when unemployment among young college graduates has been averaging 9.4 percent over the past year or so.
Meanwhile, students hoping to earn the advanced degrees that have become mandatory for many white-collar jobs will no longer be eligible for federally subsidized loans. That means graduate students are facing an $18 billion increase in interest rate payments over the next decade, about three times the amount at stake in the debate over undergrad interest rates.
Graduate students are taking an even worse loan hit, now becoming responsible for interest that accrues on their loans while they're still in school.
To be fair, both of these new problems come from earlier deals; the new one isn't creating them, it's just failing to fix them. That brings us to the deal that's paying for all of this inadequacy.
Currently, companies are generally required to contribute more into their pension plans because interest rates are at historic lows.Oh, good. Companies contributing less to pensions is a great idea. It's not like we ever hear stories about people working past retirement age because they can't afford to retire, or facing serious financial insecurity in retirement. On a somewhat better note, another provision in the deal would increase companies' Pension Benefit Guaranty Corporation premiums. So pensions might be inadequate, but the insurance on them will be in better shape.
The bill would adjust the way interest rates are factored in, and allow companies to contribute less to pensions. However, that would also lead to increased tax revenues from these companies, and this change would raise an estimated $9.4 billion over the next decade.
Congress will get its "Congress reaches deal to keep student loans from doubling" headlines, but for a lot of students and working people, this isn't much of a win.