Eliz. Warren wants to cut student interest rates to near zero

Senator Elizabeth Warren (D-MA) has introduced her first piece of legislation.  It’s called the Bank on Students Loan Fairness Act, and would reduce the rate students pay on federally-subsidized student loans for one year, from 3.4% to 0.75%.

Without congressional action, on July 1 the rate is set to double from 3.4% to 6.8%.

Warren brings up an interesting point – her bill simply asks students to pay the same rates that big banks pay for borrowing. Currently, big banks pay one-ninth the rate that students pay.

Elizabeth-Warren-on-student-loands

Senator Elizabeth Warren (D-MA)

Meanwhile, big banks pay interest that is one-ninth the rate that students will pay. That is wrong. It doesn’t reflect our values. We shouldn’t be profiting from our students who are drowning in debt while we’re giving great deals to big banks. We should be investing in our young people so they can get good jobs and grow this economy, so let’s give them the same great deal the banks get….

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 notes that American graduates are collectively $1 trillion in debt.

I know when I graduated grad school and law school, a good many decades ago now, I was already $60,000 in debt. Some of my friends were $120,000 in debt. Just to get a feel for what that meant, in 1989 terms – my monthly loan payment was equivalent to my rent. And that’s my rent in DC, which is far above the national average. I put off buying a home (in my case, a condo – homes in DC are luxuries) until I was in my 40s.

There was a lot of opportunity cost to taking out those loans – and a lot of benefit too. But it’s still absurd the amount of debt we’re forced to take on in this country, simply to get an education.

Warren concludes:

Unlike the big banks, students don’t have armies of lobbyists and lawyers. They have only their voices. And they call on us to do what is right.

Here’s Elizabeth Warren’s statement, and the text of her statement is below.

Bank on Students Speech 20130508


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  • Hue-Man

    With so many Americans fleeing to Canada to go to college, it’s obvious that the U.S. post-secondary educational system is nearing total failure and needs to be completely replaced with something that works. (After all the Canadian medical care bashing, I couldn’t resist!)

    “Over the past decade, the number of Americans who enrolled in Canadian colleges has risen by 50 percent. About 10,000 Americans are currently enrolled at universities in Canada, the Institute for
    College Access & Success reports.” [CBC French TV news report yesterday said 8,000. Canadian universities have nearly 900,000 full-time and 275,000 part-time students so about 10% of the Canadian college population is American! http://www.aucc.ca/canadian-universities/facts-and-stats/

    “Eric Andreasen, a college student from Maine, told NBC News that he chose to attend Montreal’s McGill University because of the low tuition cost. A four-year undergraduate program at McGill cost him what it would have cost for just one year at George Washington University in the US capital.

    “When the financial packages came in, it was a no-brainer for me,” he said. McGill is ranked 18thon US News & World Report’s ranking of the world’s 400 best universities and some refer to the school as the “Harvard of the North”.” http://rt.com/usa/american-canada-education-drain-473/

    I didn’t realize this made the U.S. nightly news programs this past week. http://www.cbsnews.com/8301-201_162-57582611/canada-lures-u.s-college-students-promises-afforable-education/

  • Solshield

    if she ends up helping students and keeps on doing good like this then hell, i’d vote for this senator to be president. some of my friends are $20,000-$40,000 in debt just to get their bachelors. its just scary that just to get a simple education so we can get a halfway decent job, we have to basically empty our bank accounts for the next 20 years of our life. im young i know, but interest prices on loans keep going up…and i can honestly say im afraid of what will happen to my generation. i have a girlfriend who is the love of my life (soon to be engaged once i can get enough money for a ring) but im unsure of when we will actually be able to move out since we both are in majors which require a fair amount of schooling. together, our loans are about 80,000, and we’re both are just about done with our bachelors and on our way to our masters. it worries me if we’ll ever be able to afford a home.

  • condew

    It is more fitting to ask “Mr. Boehner, where are the jobs?” Nothing leaves the House because Mr. Boehner will not allow anything to come to a vote that is not Tea Party approved, even if it could pass with a bi-partisan majority. If anything beneficial gets past Boehner, then Mitch McConnell will bottle it up in a Senate filibuster.

    So if you are going to whine about jobs, blame the Tea Party Republicans.

  • usagi

    Except that part of the increased cost of tuition is the administrative burden that shifted from the lenders to the schools with Direct Lending. It doesn’t really impact enormous state universities that already had large workforces who could be reassigned, but for small schools in specialized topics, it was a major problem. I don’t claim the private lender model was perfect, but contrary to the propaganda, the banks were carrying a not insubstantial administrative burden that had to be picked up by the schools.
    And, my point above, like it or not, that banks were making money meant that Title IV had the bank’s K Street lobbyists defending it from charges that providing any funding to students is a gateway to socialism. Dropping the banks from the equation removed a large group with money from advocating for Title IV. The Title IV program has not benefited from that loss.

  • dula

    I guess new Senators can be bold when they aren’t thinking only about running for President right away Hillary Clinton.

  • pappyvet

    Absolutely Becca,but I fear it will never pass.

  • Naja pallida

    Punishment for not being independently wealthy by the time they finished high school.

  • http://adgitadiaries.com/ karmanot

    That why in our lifetimes we are experiencing the beginnings of a failed nation and a collapsing empire.

  • http://parkandbark.wordpress.com/ Houndentenor

    I have friends whose rates are over 30%. Why? Why is that illegal. In the 70s loan sharks were jailed for charging 25% interest. Now that’s a standard credit card rate and that’s WAY more over the prime rate than it was 40 years ago. Banksters is the right name for them.

  • http://parkandbark.wordpress.com/ Houndentenor

    It says a lot about our country that we no longer want to invest in the future. Education and infrastructure are the future. Instead we bail out banksters who resell the same worthless bonds in different packages at a profit.

  • http://parkandbark.wordpress.com/ Houndentenor

    Why should students pay more than the prime rate?

  • Naja pallida

    The colonies that founded this country were based almost entirely upon indentured servitude. At any given point in colonial times, about 60% of the “country” was made up of indentured servants. People who could not afford the passage, much less be able to afford the resources to carve out a new life for themselves, so sold themselves into slavery to pay for it. We didn’t really start resorting to enslaving other races until we had a labor shortage of indentured servants. Once we started large-scale tobacco and cotton farming, that required huge numbers of unskilled laborers, and the work shifted away from being subsistence, becoming real, hard labor for no real compensation. Student loans are really just an extension of that grand tradition. Too poor to provide for your own future? Sell yourself to a financier, and work it off.

  • AdmNaismith

    The mistake is letting the banks handle public govt loans in the first place. Cut out the middle man permanently and let students borrow directly from the Govt.

    Private bank loans for students should be capped at 1% above the fed rate.
    Wile we’re at it, mortgages and CCs should be capped at 5% above the Fed rate and be fixed and/or only downwardly variable.

  • clarenceswinney

    MANUFACTURNING JOBS
    President Obama stated one of second term priorities would be “making America a magnet for new jobs and manufacturing.” A huge job. In the 2000s, we lost 5.7 million manufacturing jobs with 58,000 plants closed.
    The Permanent Normal Trade Relations bill in 2000 started the off shoring.
    We have regained 500,000 manufacturing jobs since early 2010.
    We read of jobs returning but just in trickles.
    The people want a national strategy outlines on how to make things in America which built a healthy middle class.
    Good luck Mr. President. Bless you.

  • pappyvet

    “Warren brings up an interesting point – her bill simply asks students to pay the same rates that big banks pay for borrowing. Currently, big banks pay one-ninth the rate that students pay.”
    WHAT!! The owners of the country and their Washington servants will never allow such an outrage !

  • caphillprof

    perhaps politicians, bureaucracy, media and judiciary could be marched into the countryside for re-education?

  • condew

    We’ve moved on from servitude to slavery to just plain unworkable. All debt relief should have been retail rather than wholesale. Homeowner can’t pay the mortgage, so what do we do? Ignore him and give the bank really cheap money so the bank has no need to negotiate a better deal. When Obama took the banks out of the student loan business, he made the federal help retail; we stopped loaning money at low rates to banks so they could in tern lend it at high rates to students. Maybe the rates aren’t low enough, but cutting out the banks was definitely the right move.

  • condew

    Yes. When interest rates go up, so do minimum payments. Do we really want to do that to new grads who can’t even find a job? Right now, it would be better to encourage them to stay in school, to go for an advanced degree, because the economy just won’t absorb them all. Giving them the same deal we give big banks might do that.

  • condew

    Elizabeth Warren is right, but I would go farther. We should be offering low rates to distressed homeowners directly, too. And we should not be setting the rate annually; A business that funds long term debt short term is playing with fire, so why force that mode on students?

    Privately held debt is a drag on the economy, but from the start of the recession, help for private debtors has been spotty, disorganized, and way, way less than the help offered to wall street. It’s long past time we refinanced and rescheduled legitimate long term debt like student loans and mortgages with the same near-zero interest rates we offer to savers.

  • penpal

    Great, but the interest rate should be permanent, not confined to a single year.

  • usagi

    Unlike the big banks, students don’t have armies of lobbyists and lawyers.

    Because the Obama administration forced all students into federal Direct Lending, thereby cutting the banks out of the racket completely. Which doesn’t mean this isn’t the start of a good idea (there needs to be loan forgiveness and a major overhaul how higher education is funded), but the current state of affairs on student lending is completely a choice by the Obama administration for it to be this way.

  • risingsun6666

    the problem began from what i think……….when companies started becoming rich year by year and they, politicians, buerocracy,media and judiciary became stronger,rich and powerfull collectively……and all these groups became 100% selfish now. they all won`t listen 2 us because they have made most of us, like them.

  • Sweetie

    Debt servitude is designed to maintain a politically pacified population.

  • http://www.rebeccamorn.com/mind BeccaM

    In many of the world’s nations, a prospective college student needs only pass aptitude and achievement tests in order to be granted free tuition in any number of quality colleges, universities, and trade schools.

    In fact, that was once considered to be the goal for the California state college system.

    As S1amer points out, this is no longer America’s ideal and we don’t have investing in future generations as a priority. I’m sure the banksters would love to be free to charge any interest rate they like, and it’s rather telling that the GOP has already tried to introduce a bill to turn the student loan cash-cow back over to the bankster parasites.

    Warren’s bill is the least we could do.

  • S1AMER

    She has a wonderful, wonderful idea for something an enlightened country would do to invest in its future by helping young people get themselves educated.

    Unfortunately, this is America, and we don’t do enlightened things. What we do here is lighten people’s wallets to give more money to banks and other bastions of wealth.

    But thank you for trying, Senator. I’m glad you’re in the Senate, even if you must feel very lonely much of the time.

  • Freday63

    This is a fabulous idea! Now if only my credit cards charged me that same low rate!!!

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