Elizabeth Warren: College Students Pay the Same Interest as Big Banks

If Congress doesn't act by July 1, Stafford loan interest rates will double from 3.4 percent to 6.8 percent. These loans are offered to undergraduate and graduate students attending college at least half-time at a low cost to borrowers. By the end of 2012, 39 million students were receiving student loans; that's up from 70% in 2004. If you think this only applies to students, you are wrong. Student loan debt is the largest non-mortgage debt in America, totalling some $966 billion. The American economy and student loan debt are intrinsically linked together. At least there's one member of Congress who seems to understand this.

When consumer advocate Elizabeth Warren (D-Mass.) was running for the Senate seat in Massachusetts, she made protecting college students a central part of her campaign. She made promises to her constituents that she would address the country's student loan problem if elected, and it looks like she is trying to make good on that promise by introducing her first piece of stand-alone legislation

Warren's bill would require the Federal Reserve to allocate money to the Department of Education, which would then provide student loans to those eligible at the same rate banks get. Big banks can borrow money for as low as 0.75%. Warren has a real problem with that: "In other words, the federal government's going to charge interest rates nine times higher than the rates they charge the biggest banks the same banks that destroyed millions of jobs and nearly broke the economy. I don't think that's right."


Some of you may be wondering how financially wise a scheme like this would be, but according to the Congressional Budget Office, the government makes 36 cents in profit on every student-loan dollar it puts out. That means that student loans will net the government some $34 billion dollars next year. The New York Times reports that Stafford loan borrowers make up a third of all those using federal student aid. Increasingly, students are having to make more and more sacrifices in order to pay back their student loans. This includes forgoing marriage and saving for retirement. The burden of student loan debt has rendered millions unable to participate in vital sectors of the American economy such has the housing or auto markets. In turn, this affects the overall health and ability of the economy to flourish and recover from the Great Recession. 

What are the chances of something like this passing? Not so good, but Warren is hoping to help frame the debate on student loans before the July 1 deadline. For the sake of students everywhere, let's hope that she does.

How likely are you to make Mic your go-to news source?

Andrea Ayres-Deets

PM Politics Intern- M.A. in Writing from the University of Warwick. Lover of sci-fi, awkward situations, and coffee.

MORE FROM

Dow Jones won’t talk about its reported pay gap problem

A study released by the union representing Dow Jones employees found evidence of a "significant pay gap between men and women" who had the same job title and level of experience.

Mom slams ACA repeal, shows what's at stake in a tweetstorm about son's health

This mom says that without the ACA, her son wouldn't get the medical care he desperately needs.

Theresa May announces pact with Northern Ireland's conservative DUP

10 of the DUP's MPs will vote alongside May's party in exchange for more than $1 billion of funds.

Supreme Court will hear case of baker who refused service to gay couples on religious grounds

The Supreme Court will take on the case of a bakery owner who refused to bake a cake for a gay couple.

'Hot Mic' podcast: Health care opposition, Trump on Russian meddling & Pakistan tanker explosion

The important stories to get you caught up for Monday morning.

Dozens missing after tourist boat carrying more than 160 passengers sinks in Colombia

At least six people are confirmed dead and dozens more unaccounted for.

Dow Jones won’t talk about its reported pay gap problem

A study released by the union representing Dow Jones employees found evidence of a "significant pay gap between men and women" who had the same job title and level of experience.

Mom slams ACA repeal, shows what's at stake in a tweetstorm about son's health

This mom says that without the ACA, her son wouldn't get the medical care he desperately needs.

Theresa May announces pact with Northern Ireland's conservative DUP

10 of the DUP's MPs will vote alongside May's party in exchange for more than $1 billion of funds.

Supreme Court will hear case of baker who refused service to gay couples on religious grounds

The Supreme Court will take on the case of a bakery owner who refused to bake a cake for a gay couple.

'Hot Mic' podcast: Health care opposition, Trump on Russian meddling & Pakistan tanker explosion

The important stories to get you caught up for Monday morning.

Dozens missing after tourist boat carrying more than 160 passengers sinks in Colombia

At least six people are confirmed dead and dozens more unaccounted for.