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updated 7/8/2013 11:45:33 AM ET 2013-07-08T15:45:33

Student loan rates doubled, but Congress has yet to act to give college students any relief. What's the next step?

Student loan rates doubled from 3.4% to 6.8% on July 1, and while the Senate is set to vote Wednesday on a plan to bring Stafford loan rates back down before students return to school in the fall, the fundamental problem of how to pay the ballooning prices for higher education still needs to be addressed.

“We have to decide how we are going to fund students to be able to go to college,” panelist L. Joy Williams said on Saturday’s Up with Steve Kornacki. “We have to change out that model.”

Tuition costs continue to rise at alarming rates, and as young people struggle to find jobs, the potential effect on generations of students could be severe. Seven million students are expected to take out loans this fall.

Some states are already looking for new ways to fund higher education; in Oregon, there is a proposal that would allow students to attend public colleges tuition-free in exchange for a guarantee that they would pay the state a percentage of their incomes after they finish school. Could this “pay it forward” model be the future?

Watch the whole discussion above.

Video: Congress lets student loan rates double

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    >>> congress on monday allowed interest rates on student loans to double. lawmakers in both parties have promised to lower the rate for students with financial need before they borrow for the coming school year. 27 million students are expected to take out these loans in the fall, so far competing plans from congressional republicans and democrats and even president obama led to a legislative stalemate. senate is expected to vote on wednesday to take up a democratic plan to retroactively extend interest rate for another year, but likely to face a republican filibuster. the average student taking out a subsidized stafford loan will see total interest payments rise from $2,400 to $5,000. that averages out to $2,600 over the life of a normal ten-year loan. the average recent college grad is already $27,000 in debt. i know, little something from personal experience how that feels. you cover this stuff. we've been down this road before. last year they came up with a one-year extension and here we are we have the senate vote coming up on wednesday. any optimism that before the start of the school year there is going to be some sort of agreement?

    >> it is an issue that both sides strongly believes needs to be fixed and no one wants to anger young voters. the question is how it gets done and it's far from clear how it will happen. senate democrats will vote on a bill wednesday to extend the current rate for a year and republicans will filibuster it. unique and complicated because at the heart of this there is a rare and policy split between democrats and the white house and the way the president introduced his student loan fix in the 2014 budget. last year was campaign season, so, democrats were way out ahead on this. they had machines running and mitt romney over a barrel and mitt romney sided with the president over congressional republicans. the issue was settled very comfortably and very easily. this time is different. keep pointing to president obama 's plan to tie the loan rate to the market and congressional democrats, i believe, are not so fond of that idea.

    >> what do you make of that dynamic then when you have the white house philosophically in line with the house republicans on that issue?

    >> i think the white house is looking at a long-term plan and i don't like the president's plan, but i think what we really have to do now, steve, is just roll this back to the 3.4. i'd like to see it for two years, but if it is one year, whatever. this is a lot more money for these kids and they just can't afford it. you and i, obviously, had student loans . getting increasingly difficult. you need work study and student loans and grants and scholarship and the congressional republicans have pushed back on all of that. bunlts cut back on work study , pell grants and student loan interest rates , they want to raise it. just more and more difficult for kids to go to college. i think let's at least roll this back to the 3.4% for a year or two and then figure out long-term what the formula will be. right now i don't want to see this double and we have to do this retroactively before the school year.

    >> some studies that shown that the student loan programs they provide assistance to people and also encourage tuition hikes. some issues with the sort of the idea of the student loan program which isn't to say it hasn't done wonderful things and what caught my eye this week is what is happening in oregon . in oregon a pilot program being launched that basically the idea is to get to a place for public universities in oregon and no tuition and no loans. if you go, basically agreeing to pay back a fixed portion of what you earn over 10, 15, 20 years over a certain portion of your career. basically investing in you and you'll pay them back on what you earn coming out of it.

    >> they call it pay it forward . basically go tuition free and with the promise that post-graduation 3% of your pay check would contribute for other students to do the same thing. the problem that they're having, they have to come up with is about $9 billion for start-up costs for the program. so, how do they get the funding from that? i think with a combination sort of using some young people and some ingenuity and hacking and sort of coming up and fund-raise fund-raising for some of it and getting funding from government institutions. it's a real innovative way to address the problem and i think that's the issue. as a country, we have to decide, you know, how are we going to be able to fund students to be able to go to college? becoming increasingly difficult to get a job without a college degree and this is a big part of our economy going forward. putting the rate back for two years so we can really come to the table and come up with a comprehensive solution on how we are able to provide students the money necessary to go to college. and i think you're right. those providing the money necessary for kids to get loans, your tuition shoots up. i look at hofstra where i went and the amount of tuition, i wouldn't be able to afford that. i think as a country we have to decide and change our model on how we're going to fund college and how we're going to be able to fund that. there is both the private responsibility and i don't think we have done a great job as a country looking at what the country has to contribute. in reality, having a college graduate , it's contribute to our economy largely.

    >> if i could just introject. part of it is that the federal government is not making the investment in higher education . so, you know, tuition goes up because the federal government is not providing money, you know, for repairing schools, for research at universities. so, you know, we need to make an investment in education otherwise the college tuition will continue to go up and then the student loan crisis becomes even more of a crisis. we're not doing that.

    >> we're not, even in the student loan conversation, we're not even talking about if you've seen in the past couple of weeks hbcus and sort of how the changes in the loan program has affected the students going to historically black colleges . typically have been able to afford and qualify for those loans and now not even qualifying for that. that is putting undue harm on the colleges and universities that were able to accept these students in the past. we need a fundamental change overall.

    >> bigger issues. but we're stuck on the 6.8 versus the 3.4.

    >>> courts weighed in on gay marriage and now it's congress' turn, maybe. that's next. take

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