Obama Hails Student Loan Legislation as Middle Class Boon

President Obama’s weekly address has once again focused on his message that policies like transportation and student loan interest legislation will help the middle classes.

“For months, I’ve been calling on Congress to take half the money we’re no longer spending on war and use it to do some nation-building here at home,” he said. “There’s work to be done building roads and bridges and wireless networks. And there are hundreds of thousands of construction workers ready to do it.”

The address was delivered from a food processing plant in Ohio and was the first after he signed into law the Stafford Loan extension last Friday.

He continued: “The same thing is true for our students. The bill I’m about to sign is vital for millions of students and their families. But it’s not enough to just keep their student loan rates from doubling.”

Although Reid Epstein, writing for Politico, believes that no significant new legislation will be passed before the presidential election in November, Obama is citing the student loan extension as the first step in his middle class reforms.

“For months, I’ve been calling on Congress to reform and expand the financial aid that’s offered to students,” Obama said. “I’ve been asking them to help us give two million Americans the opportunity to learn the skills that businesses in their area are looking for – right now – through partnerships between community colleges and employers. In America, a higher education cannot be a luxury reserved for just a privileged few. It’s an economic necessity.

The controversial subsidized student loan rate extension was agreed by both parties, neither willing to deal with the political fallout of denying it during an election year. The cost to the country of preventing the rise from the subsidized rate of 3.4% to the natural rate of 6.8% is estimated to be around $6.7 billion. The cost to the individual student had the subsidy expired as originally intended would have been around $1000 over the course of the loan. Some, like Neal McCluskey, believe the extension to be bad policy and that all artificially cheap students do is cause the cost of tuition to rise further as the colleges take advantage.

Even those who favor the subsidies didn’t get all they wanted from the extension as last minute compromises eliminated the traditional six month grace period on repayments. Now undergraduate students will begin to accrue interest immediately upon graduation and graduate students will begin to accrue interest on the loans as soon as they receive them.