Can anyone tell me why student loans need to be funded/provided/backed by the federal government?

(Oh, and the rate increase will apply to new student loans, not existing student loans. http://www.usatoday.com/money/perfi/columnist/block/story/2012-04-30/student-college-loans/54647578/1)

And even if rates go up, 6%-7% is not bad for a loan regardless of loan type. Historically, this is not a bad rate by any means. Anyone out there remember when savings accounts & CDs actually PAID off? The policies of the federal government encourage spending & discourage saving. Perhaps a higher interest rate will force students to plan on an education that suits their financial disposition. It is not the responsibility of the federal government to ensure happiness, just the pursuit of it.

Punishing people? Really? I think their signatures are somewhere on some loan documents. Did they read the fine print, or just sign their names? If anything, they're being punished for being dumb.

Michael is spot on. A college education is not a right, it is a privilege. No one forces students, under penalty of law, to attend college and amass student loans. Any "punishment" of taking out student loans for 4 years occurs when students have to pay them back after graduation -- they cannot be discharged in bankruptcy unlike the credit card bills incurred during school.

If I had to do it over, I would have worked more during my college years and paid for college as I went. Not only would I have gained even more real-world experience, but I wouldn't have had student loans upon graduation. I think students are hamstrung in career and family choices due to the burden of student loans. Many "good" things are avoided in order to pay the student loan bill first, such as getting married and having children, or taking a lesser-paying but more wholesome job.

Good points, J.

Seriously with the way our economy is right now I hate to see any young person go in debt without a guarantee of a job. How does one pay off a debt without an income?

Before we answer this question, we need to consider a more important one.

What kind of country do we want to be?

Do we want an educated population that has a chance in the ultra competitive, and increasingly educated, global marketplace, or do we want a population of service and retail industry workers?

Do we want to lead the world, or follow? I can assure you that our global competitors are investing in their youth.

Personally, I'm with Benjamin Franklin and think we need should invest in the education of our youth. “The only thing more expensive than education is ignorance.”

I'm for zero interest student loans. I don't think the United States has a chance to maintain our position of leadership in the world if we continue to limit access to higher education.

Thanks, good question

H.R.5 passed the U.S. House on 1-17-07. The vote was 356-Yes to 71-No (8 not voting). (Overwhelmingly bipartisan vote) The bill was introduced by George Miller (D-CA), at the time, Chairman of the House Education and Labor Committee. (Democrats controlled both Houses then.)

Under the terms of the bill, the rates on subsidized Stafford loans for college students were to fall from 6.8 percent (at the time of passage) to 6.12 percent in 2007, 5.44 percent in 2008, 4.76 percent in 2009, 4.08 percent in 2010 and 3.40 percent in 2011.

The Democrat leaders in 2007 wrote the language of H.R.5. They stopped with the year 2011. Now, in 2012, under the terms of the bill, the rate cuts expire and will return to 2006 levels. (Here is another example of a rate returning to a previous level: On January 1, 2013, the federal estate tax exemption and rate, signed by President Obama 12-17-10, will default to the numbers that were in effect in 2001/2002.)

The cost of H.R.5 was close to $6 billion over five years, which was “paid for” by reducing the profits and increasing the fees of the top 1 percent of student loan providers that participated in the Federal Family Education Loans (FFEL) program. That top 1 percent of lenders was made up of about 30 companies that provided 90 percent of all student loans.

Which employers (the businesses to be taxed are employers) would Democrats in Congress like to take money from to give to the student loan program?

I believe Congress should keep the rates at what they are today along with lowering the rated on Parent Plus Loans. The congress mismanagement of funds should not be passed down to students and parents who are supporting /seeking higher education. Maybe if congress let a year without a raise pass or gave up their health insurance for life which no American citizen has there would be no reason to raise rates. A corrupt government run by lobbyist continues to destroy this country.

Student loans aren't the issue; they are merely a symptom of the disease. The real problem is the cost of college education. The cost has risen over 400% since 1980
(the only other industry that has experienced that type of inflation is health care). The reason so many kids and families feel compelled to take out a loan is because the cost has exceeded what an average family can afford. Colleges and Universities have lost touch with their mission which is to educate students. Instead they are spending millions of dollars on things like student housing akin to hotel quality and sports and recreational facilities which rival anything a private citizen could afford. This is why costs are rising at such an alarming rate and why students must now sacrifice future earnings and purchases to attain a college degree. Lowering rates will create the same overspending that we just witnessed with the housing crisis. Of course colleges and universitites want to keep the rates low to encourage more borrowing. But we have all seen the damage and destruction caused by too much leverage, especially when the only beneficiaries seem to be the ones responsible for this mess. Find and exploit efficiencies which are available through technology. Wipe out redundancies (Mizzou doesn't need an engineering school when Rolla provides the same thing). Make teachers teach! Don't provide your students with a higher standard of living than they can afford when they graduate.