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Tuesday, September 27, 2016

Federally subsidized student loan rates are set to rise from 3.4 percent to 6.8 percent unless Congress acts. But Senator Elizabeth Warren (D-MA) wants to skip that debate and get the answer to another question: Why should students pay higher interest rates than banks?

Under Warren’s new proposal, students would pay the same discount rate financial institutions get from the Federal Reserve.

“Right now, a big bank can get a loan through the Federal Reserve discount window at a rate of about 0.75%,” Warren said on the floor of the Senate Wednesday, according to her prepared comments.

“But this summer, a student who is trying to get a loan to go to college will pay almost 7%. In other words, the federal government is going to charge students interest rates that are nine times higher than the rates for the biggest banks — the same banks that destroyed millions of jobs and nearly broke this economy.”

The immediate likely objection to such a proposal from Republicans is that this is new government spending in a time when we need to reduce our deficit — which is falling at a record rate. Warren will point out that the Treasury profits from student loans. The student loan reform that was passed along with the Affordable Care Act eliminates banks from the loan process and returns their former profits to taxpayers beginning in 2014.

“Some may say that we can’t afford this proposal,” Warren said. “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.”

Massachusetts’ senior senator points out that the American public saved the big banks, which Attorney General Eric Holder admitted are “too big to jail.” A Bloomberg report suggests taxpayers offer an implied $83 billion subsidy to the biggest banks, with an implied guarantee in case of another financial crisis.

America’s total student loan debt now totals well over $1 trillion, leading to record defaults.

The Century Foundation‘s Benjamin Landy explains that this crisis is likely “driven by borrowers who graduated or entered the job market at the height of the recession and have now reached the end of the maximum three-year deferral period allowed under the federal loan program.”

In other words, students stricken by the worst of the financial crisis are now badly in need of a bailout. And Senator Warren is one politician who has a plan to do that responsibly: Just treat students with the same generosity we offer the big banks.

AP Photo/Cliff Owen

  • kanawah

    Sounds good to me. In the present market, 6.8% is usury.
    .75 is where it should be.

  • Pamby50

    Go Elizabeth!! Keep fighting for our students.

    • InsideEye

      Just say that you are an American :Indian or Kenyon and you can have a free Ride even through Harvard…..on the rest.

  • I hope she gets quite a few to sign onto this from the senate, no Corp. shills from the Repugnant party I’m sure.

  • Finally a politician that keeps promises. Warren for Pres.

  • 788eddie

    This is one proposal I can fully support.
    BTW, I am a registered Republican. I hope most of the members of my party also supports this.

  • Too bad we don’t have more people like Elizabeth Warren in Congress. At a time when the rate of college graduates in most industrialized nations surpass that of the United States, the last thing we need is to erect barriers that preclude bright, poor, students from attending college because they don’t have the financial means to pay tuition and books.
    The reason tens of thousands foreign professionals enter the USA every year with H1b visas and get the some of the best jobs our economy has to offer is not because they want to visit the Grand Canyon or Niagara Falls, they come because American employers in high tech fields are unable to find qualified applicants in the USA and have no choice but to hire foreigners or move their operations overseas. We either get our act together when it comes to education or we will likely lose our pre-eminent position in the world within a generation.

    • RobertCHastings

      Unfortunately, because of current quotas,many of those foreign students who get their graduate educations here are forced to return to their home country. This resource must be captured, for our future and to augment a current workforce that is unqualified for so many of today’s jobs.

  • charleo1

    With the world of marketable job skills, changing as never before. Those
    graduating this spring, with a four year degree, will find what was once a golden
    key, to a career, financial security, and stability, for their parents, is today, only a
    beginning. The reason of course, is technology is changing the workplace.
    And the skills employers are looking for, are becoming much more specific
    and a lot less labor intensive, than ever before. That means a factory that once
    employed 1000 workers. With automation, and computer driven robotic assembly
    lines. That same factory can now produce twice the product, in half the time.
    A great leap in productivity, and company profits. But those other 900, will now
    likely require retraining. Or, find themselves in the already overcrowded, and low
    pay, service sector. So, the times, they are a changing, for the labor pool.
    But, I would hope they are also changing for the employers as well. Time, and
    again, in interview, after interview, we hear employers say, our entry level
    positions start a $60,000, with company provided benefits. But, I can’t fill these
    jobs, if people lack the skill, and background, in working with tolerances of less
    than 1/1000th of an inch. Has a general knowledge of computer programming,
    and hydraulics, and we train them from there. And I thought, it’s a pity you
    weren’t visiting the High Schools around the town. Introducing your company.
    Because the time to find out how, and where, to obtain those skill sets for both,
    the future employer, and the future, employee, is now. Before they spend, $100,000, on a degree, only to find themselves paying it off, while working at Cosco.

  • OMG! . . I think I love this woman! Where has she been all of our lives? CLINTON/WARREN 2016!!!!!!!! FOR AMERICA!!!!!

  • This Is The Difference In The GOP Tea Party And The Democrats, The Tea Party And The GOP Only Looks Out For The 2% Wealthy While The Democrats Looks Out For All The American People!! Mainly The 98%, Cause The 2 % Got Enough Money To Look Out For Themselves!!

  • Budjob

    Liz Warren/Bernie Sanders/President/Vice president or vice versa.They are both excellent choices for the working men and women of the USA!

  • RobertCHastings

    If there is a God in Heaven, of which I am certain, Elizabeth Warren will soon be president, and, I hope, Hillary as her VP. A talent like this is wasted arguing before Congress, although she has the fire in her to become one of history’s greats.
    The student loan argument SHOULD be a no-brainer, if one of our major goals over the long term is to educate as many people as possible, to fiil the predicted shortages among qualified doctors, and prepare our workforce for the millions of technical jobs in the next decade for which our workforce is currently unqualified. She is one of many who is working for this country’s future against an obstructionist minority.