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82% of Americans want Congress to make student loans cheaper, but it's a bad idea

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The Wall Street Journal and NBC are out with a new post-election poll, and the most popular policy idea for the next Congress is… cheaper student loans.

A whopping 82 percent of survey respondents said they supported "providing access to lower-cost student loans and providing more time to those who are paying off their debt":

Student loan poll chart

Cheaper student loans are more popular than minimum wage hikes, infrastructure spending, and fighting Ebola in West Africa.

Unfortunately, while making student loans cheaper is politically popular, it doesn't make much sense as policy.

There are better ways to make college affordable

Historically speaking, student loans are already fairly cheap: the 4.8 percent interest rate for undergraduates is lower than most rates of the past two decades.

The big issue, though, is that student debt in the US isn't high because it's expensive to take out a student loan. It's because tuition in the US is expensive.

Let's say Congress cut student loan interest rates from this year's 4.8 percent for undergraduates to 3 percent, a true historic low. The average indebted four-year college graduate, who has $28,400 in debt, would end up saving about $25 per month.

Those savings eventually add up — they'd slice around $3,000 from the average debt burden for a four-year college graduate. But they would also be regressive, benefiting people who borrow the most money and graduate from college when it's students with smaller loans and no diploma who really struggle. And safety net programs like income-based repayment already exist to help people who can't make their monthly payments.

Cheaper student loans would make life a little easier for all student loan borrowers. And unlike other policy options offered this poll, cheaper student loans sound like they don't cost taxpayers anything. So why be against it?

Because lower interest rates aren't completely free. Keeping interest rates at 3.4 percent for borrowers with financial need in 2012, when interest rates were scheduled to double, ended up costing $6 billion. (Although the student loan program as a whole makes a profit for the government under its current accounting rules, undergraduate loans are a net loss.)

So the right question to ask is whether a few billion dollars in the higher education budget could be spent on better things than an interest rate cut. The money could expand Pell Grants for low-income students, which cover much less of the cost of higher education than they used to. Or it could double or triple or quadruple the size of the federal work-study program, which benefits students both financially and educationally. Or it could create incentives for states to spend more on their own public colleges and universities — perhaps the best way to drive down the price of tuition for everyone.

All of that is a better way to deal with student debt than making it slightly cheaper to take out a student loan.