Senator Elizabeth Warren, consumer advocate and erstwhile Harvard Law professor, has introduced her first bill. It would lower the interest rate that students pay on their federal education loans.
According to a piece in the Boston Globe:
Federal loan rates are scheduled under federal law to double on July 1, from 3.4 percent to 6.8 percent. Warren’s bill would let students borrow instead at the rate big banks pay to the federal reserve, which she said is currently about .75 percent, between July 1, 2013 and July 1, 2014. The rates would go up again after that unless Congress acts again.
Under current law, “the federal government is 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 this economy,” Warren said on the floor today.
Well, it’s worth a try anyway. I’ve point out before that the difference between a subsidized Stafford loans payment at 3.4 percent and 6.8 percent is not actually that much money for students on a monthly basis. That .75 percent rate would sure be nice though.
It would not, however, be sustainable. The reason students pay interest on student loans is because that generates money for the federal government to loan out to students. That’s how the program is (more or less) sustainable.
The rate Warren proposes would only apply to loan holders for one year “while the federal government works on a longer term overhaul, which she promised to lead,” according to the Globe.