Sam at SavetheGOP has about the only logical point against cutting the rates.
As long as there is a strong demand by students to attend a university there is no incentive for administration to get their costs under control. If you can raise tuition 5% every year for some new pet project and the students continue to pay and enrollment thrives, why not keep raising it every year? Want to build a new football stadium with all the latest and greatest amenities? Raise the tuition. Want to add a new set of worthless classes and pay a pompous professor to pontificate about the power of the penis? (No, seriously) Raise the tuition. I can go on, but you get the idea.
Students will pay the increased costs for the same reasons the universities raise them. They too, can, which is why I am troubled by this cut in the interest rates making these loans more affordable. As long as it keeps getting easier and easier for college students to buy their education on credit, the higher tuitions will continue to increase making it more and more expensive. We’re already at the point where tuition at some schools surpasses the cost of a house. While those with a degree do generally make more money over their lifetimes than those without, at what point will the cost of obtaining the degree outweigh the financial advantage in the workplace?
Essentially, tuition rates are the easiest taxes to raise. The people that pay them have zero political power and no one in power seems to care how much debt they have to start life with.
So by lowering in the interest rate, the government makes it easier for schools to finance their tax increases on people that don’t make or have any money.
It’s definately a more convincing argument than lower finance rates = higher subsidies.