Let's save student loans

March 23, 1998

Excerpt from a Tuesday Miami Herald editorial:

THE stakes are high in a dispute under way over federally guaranteed student loan interest rates. A reform scheduled to take effect on July 1 will change the way interest rates are calculated on student loans.

Now some banks are balking. They have warned a House subcommittee that they'll quit offering such loans if the feds don't fix the law.

The banks' critics responded by citing a recent Treasury Department study. It found that "banks are currently receiving profits on student loans in excess of a competitive target rate of return."

Even so, the Clinton administration concedes a flaw in the law, which hitches student-loan interest rates to long-term benchmarks more appropriate for mortgages.

So the Clinton administration is proposing a sensible compromise. It again would link student-loan rates to the yield on Treasury bills. It also would reduce the "spread" and simplify the loan-origination process.

Some banks still aren't satisfied with the compromise.

Helping America's students is a good way for banks to cultivate a new generation of customers. Indeed, in one sense, student loans are the ultimate in community reinvestment. That's why Congress should promptly enact the Clinton administration's reasonable plan.

Pub Date: 3/23/98

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