The current discussion of student-loan interests rates has created a welcome focus on college access and on the difficulties some students have repaying their education loans. The federal government does need to take greater responsibility for protecting students from unmanageable education debt.

Unfortunately, the issue is much more complicated than the current political discourse might suggest. There isn’t time to develop a sound long-term plan addressing this issue before July 1, when the interest rate on a subset of loans students will use next year is set to increase. Locking in current interest rates for another year is likely the only viable solution.

But this is a solution that solves a small set of problems for a small subset of students. A better solution depends on a clear understanding of the issues and a realistic perspective on what really matters for educational opportunity.

Jason Delisle details a number of important points: in in an excellent New America Foundation Ed Money Watch Blog:

• The only loans on which the interest rate is now 3.4 percent are a subset of those that were issued during the 2011-12 academic year to undergraduate students with documented financial need. Loans issued earlier, loans to graduate students, and loans to qualified undergraduates that exceed the limit on subsidized borrowing (loans on which the government pays the interest while the student is in school) all have higher interest rates—many 6.8 percent. The interest rates on many of these loans are fixed for the life of the loan. No changes in interest rates for future loans will help students repay these existing loans.

• Eligibility for the subsidized Stafford loans in question is not based on income. It is based on “need.” Need depends on a combination of family resources and the cost of attendance at the student’s particular institution. Many students from families with incomes significantly above $100,000 per year qualify for subsidized loans because they attend expensive colleges and/or have siblings in college at the same time. Some much lower-income students do not qualify for these loans because they are enrolled in institutions with very low prices—particularly community colleges. These students pay 6.8 percent on their unsubsidized loans—and will continue to pay that rate whether or not Congress figures out how to prevent rates from rising.

In 2010-11, subsidized Stafford Loans constituted 35 percent of education loans issued, 38 percent of federal education loans (excluding private loans), and 42 percent of federal loans to students (excluding loans to parents).

In other words, lowering the interest rate on newly issued subsidized federal student loans is not going to solve the student-loan repayment problem. Once the election frenzy is over, members of Congress should think hard about fixes that will be both feasible and more likely to address the widespread concerns about students struggling with their education debt.

What are the answers? Two steps are clear.

1)  Neither federal student loans nor private student loans are currently dischargeable in bankruptcy except under extraordinary circumstances. There is no reason why credit-card debt or other unsecured personal loans should be easier to adjust than student loans. Do we want students to use their credit cards to pay for college so they will be able to discharge the debt if they find themselves in dire financial straits?

2) There are strict limits on federal student borrowing. In contrast, private student loans are available up to the cost of attendance less other aid received. The vast majority of students who have jaw-dropping amounts of education debt have relied on private loans, either exclusively or in combination with federal loans. Many of them had no idea that these private loans were so different from federal loans. They don’t come with guarantees of deferment or forbearance for financial hardship; they don’t qualify for the income-based repayment plan that limits monthly payments to an affordable amount; they sometimes have to be repaid even if the borrower dies.

Only federal student loans should be granted an official label as student loans. The government should not grant special privileges like shelter from bankruptcy to private lenders who make unsecured personal loans to students—as much as those loans might in some cases be the best option to make college possible for some students.

Governments should also be much more proactive in making sure that students and families have good information and counseling on their full range of educational and financing options. Too often, the corporation selling the educational services becomes the sole, and hardly unbiased, source of advice.

But what about the interest rates? No one seems to be questioning the practice of relying on Congress to set the interest rates on these loans based on current political conditions.  Most loans people take to buy houses or cars, postpone paying off their credit cards, or start businesses depend on market conditions. Some rates are fixed. You can lock in a rate on a mortgage for 30 years, with the option to refinance if market rates decline significantly. But some are variable. Some mortgages and most loans of other types carry interest rates that may go up or down over the life of the loan, depending on the state of financial markets.

Federal student-loan rates have not always been fixed. The 6.8-percent interest rate on Stafford student loans was instituted in 2006-07, replacing variable rates based on Treasuring borrowing rates. The 6.8 percent rate looked good that year, when the market-determined variable rate on outstanding loans was 7.14 percent. From 1994-95 through 2000-01, the variable rate exceeded 6.8 percent. But from 2001-02 through 2005-06, the variable rate was below 6.8 percent—as low as 3.37 percent in 2004-05. Because outstanding loans issued before the interest rate was fixed still experience annual rate changes, it’s possible to compare the rates students pay on the newer fixed-rate loans to those they pay on the older variable-rate loans. The fix was a good deal in 2006-07 and 2007-08, but hasn’t been since then. The interest rate on the variable-rate loans that were issued before July 2006 was 2.47 percent in 2010-11—even lower than the 3.4 percent on new subsidized Stafford loans issued that year.

In other words, the right interest rate on student loans—and the interest rate that will feel right to both borrowers and taxpayers—depends on market conditions. Fixing the interest rates at any level—3.4 percent or 6.8 percent or anything in between—means the rate will sometimes be too high and sometimes too low.  Moreover, the idea that when you take the loan determines how much you will pay for the life of the loan creates an arbitrary distinction among students. Those who took subsidized loans in 2009-10 will pay 5.6 percent for the life of those loans. The same students will pay 3.4 percent on the loans they took in 2011-12.

Confusion abounds. Many students have a combination of unsubsidized and subsidized Stafford Loans. They have different interest rates depending on their type and on what year they were issued. The rates are not a function of the financial circumstances of the students.

Taxpayers should subsidize students. But the size of that subsidy should not depend on the gap between the arbitrary rate chosen by Congress in a particular year and the market conditions of the moment. And the subsidy should not be greater because the student attended a more expensive institution.

The students most in need of subsidies on their student debt are those for whom the investment in college did not pay off well. Some of these students may have made poor choices or failed to keep up their end of the education bargain. But many learned while in school that a path that looked reasonable was not the best choice; many graduated into a weak economy; some faced unanticipated life circumstances that disrupted their plans; some trained for occupations that stopped providing opportunities. We don’t know in advance who those students will be and we can’t solve their problems by promising low interest rates on a subset of student loans in perpetuity. We should focus on an income-based repayment plan that is strong enough to prevent students from owing unmanageable payments on their education loans regardless of the interest rates they carry.

Not every policy that saves some students money is a good policy. Surely we are capable of designing a student-loan program that will make college possible for more students, protect students against unforeseen financial difficulties—and make good use of taxpayer funds.