Degrees of debt

摘要

Should the government subsidise the loans students take out to pay for university? Washington's politicians seem in little doubt: Republicans and Democrats alike are in favour. But how generous should the terms be? That question is much thornier-so thorny, in fact, that Congress failed to answer it before adjourning for the Fourth of July holiday. As a result, the law permitting the most generous subsidies lapsed this week. The government will still offer students loans, but at an interest rate of 6.8%, twice the previous one. The change does not affect any of the 39m Americans who currently owe the government a collective $1 trillion in student debt. Their rates were fixed at the time of borrowing; the new one applies only to new loans. Moreover, only about a quarter of the loans to be issued this year will be of the most generous sort, the Congressional Budget Office (cbo) estimates. Others already carry rates as high as 9%.