The new loans will have an interest rate of 8 percent, higher than the federal loans which students will access before turning to state loans but lower than the going rate for private loans.
“In a time of rising borrowing costs and tightening lending by private banks, this new lower-interest student loan program I have proposed will help ensure New Yorkers have access to the funds they need to finance their college educations.”
College students have shown an insatiable appetite for debt, so the new program will certainly be to their liking. Critics fear that too many college students will take advantage of the loan bonanza and that the result will be a sea of over-leveraged college graduates (and drop-outs), with grave consequences for them and for the state that will have to deal with their defaults. The imagined endpoint is a student loan default crisis similar to the mortgage foreclosure crisis. The ruse that loans make college affordable is not true; they merely make college accessible. It’s time more attention was paid to grants than to loans, as the Project for Student Debt advocates.