With student loan interest rates to double in July, Elizabeth Warren introduces Bank on Students Loan Fairness Act
Federally subsidized student loans is set to double from 3.4 to 6.8 percent starting July 1; however, Senator Elizabeth Warren (D-MA) says that students should benefit from the same interest rates that the big banks do in a speech delivered on the Senate floor yesterday.
Senator Elizabeth Warren
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Come July 1, the cost of borrowing money to go to college will double. Warren notes that today’s graduates collectively carry more than $1 trillion in debt—more than all the outstanding credit card debt in the whole country.
“Keep in mind: these students didn’t go to the mall and run up charges on a credit card. They worked hard, they stayed in class, they learned new skills, and they borrowed what they needed to pay for their education.”
She goes on to point out that a big bank can get a loan through the Federal Reserve discount window at a rate of about 0.75%. But this summer a student who is trying to get a loan to go to college will pay almost 7%.
This has prompted the Senator to introduce Wednesday, The Bank on Students Loan Fairness Act. The bill would allow students who are eligible for federally subsidized Stafford loans to borrow at the same rate that big banks get through the Federal Reserve discount window.
Warren clarifies, “For one year, the Federal Reserve would make funds available to the Department of Education to make loans to students at the same low rate offered to the big banks. This will give students relief from high interest rates while giving Congress time to find a long-term solution.
“Some may say that we can’t afford this proposal. I would remind them that the federal government currently makes 36 cents in profit on every dollar it lends to students. Add up all of those profits and you’ll find that student loans will bring in $34 billion next year.
“Meanwhile, big banks pay interest that is one-ninth the rate that students will pay.”
“If the Federal Reserve can float trillions of dollars to large financial institutions at low interest rates to grow the economy, surely they can float the Department of Education the money to fund our students, keep us competitive, and grow our middle class”, Warren said.
[…] Elizabeth Warren introduced a bill in May to deal with this rate hike, read more here […]