What if federal student loan interest rates stayed at 0% forever? | Smart change: personal finance

“It’s just very expensive to reduce or write off interest on loans. To bear this cost, either taxes have to rise or spending has to fall in the long run, ”he says.

Congress ultimately has the power to do either, and eliminating interest is not a totally new political idea. Senator Marco Rubio (R-FL) has proposed replace student loan interest with a one-time origination fee added to a borrower’s loan amount. But as with most political issues, getting a broad consensus on raising taxes or cutting spending would be an uphill battle.

The problems of increasing student debt would not be solved by just canceling interest rates. On the one hand, that doesn’t answer the question of why so many students have to go into so much debt in the first place.

“This is obviously not a perfect solution, because it only solves part of the problem. This does not solve the problem of disinvestment in public higher education, ”says Reed

Despite the subsidization of public universities more than half of undergraduate tuition fees on average, Americans spend nearly twice as much on higher education than the average in developed countries, according to a 2018 report of the OECD.