Sen. Elizabeth Warren (D-Mass.) introduced legislation last week that would allow students to pay the same interest rate on federal loans as big banks pay to borrow, urging lawmakers to keep interest rates from doubling this summer.
Student loan rates are expected to increase from 3.4 percent to 6.8 percent on July 1, though banks will be able to continue to borrow from the Federal Reserve’s discount window at approximately 0.75 percent.
Warren said that while providing banks continued cheap access to credit will bolster the economic recovery, supporting college graduates is also crucial.
“Some people say that we can’t afford to help our kids through school by keeping student loan interest rates low,” Warren said. “But right now, as I speak, the federal government offers far lower interest rates on loans, every single day – they just don’t do it for everyone…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. That isn’t right. And that is why I’m introducing legislation today to give students the same deal that we give to the big banks.”
Warren’s Bank on Students Loan Fairness Act, would allow students eligible for subsidized Stafford loans to borrow at the same rate as banks. The Federal Reserve would make funds available to the Department of Education for one year to provide students with relief from high interest rates, allowing Congress time to develop a long-term solution.
“Lend them the money and make them to pay it back, but give our kids a break on the interest they pay,” Warren said. “Let’s Bank on Students… 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.”