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A win-win student loan solution

For the video: http://youtu.be/L6mn8ZODp5o

Update April 28, 2012 — Really? Taking money from preventive health care services to subsidize banks? Really? If you haven't done so, read my proposal, which proposes a win-win solution for borrowers and taxpayers — and doesn’t rely on reducing preventive health care services.

Video Text

The coming scheduled reversion in student loan interest rates to 6.8% has drawn much attention over the past week or so. President Obama has proposed continuing the temporary reduction to 3.4% by continuing additional subsidies to lenders, Student Loan Interest Rates Loom as Political Battle, and today Mitt Romey agreed with the idea Mitt Romney backs extension for student loan rates.

Under the current way student loans are structured this proposal has a significant cost: "The Congressional Budget Office has estimated that a one-year freeze on the interest rate for subsidized Stafford loans would cost $6 billion."

Republican leadership is opposed to the extension: "Extending the low rate would be too costly, Mr. Kline said. “We must now choose between allowing interest rates to rise or piling billions of dollars on the backs of taxpayers….Mr. Kline, who earlier this year called the interest-rate hike a “ticking time bomb set by Democrats,” said he was exploring other options in hopes of finding a solution that served borrowers and taxpayers equally well."

I propose such an option, an option that actually provides additional revenue to the government, and a reduction of the cost to taxpayers, while reducing borrowing costs for all those owing student loans.

The U.S. government can currently borrow money at slightly less than 2%. We should simply work together through government to refinance all outstanding student loans, which would allow a permanent reduction in interest rates on such loans to 3%, allowing one percent for administrative costs and additional revenue. The process would be simple: the federal government would issue debt in an amount equal to the outstanding student loan debt, and would directly refinance all such debt with the proceeds.

Instead of costing taxpayers over $36 billion per year, there would be net revenue of approximately $10 billion per year that could be reinvested in education programs at no expenses to taxpayers, or once administrative baselines were established, could be used to rebate interest payments.

That\'s what I call a common sense win-win solution that serves borrowers and taxpayers equally well!