Some people say that we can’t afford low interest rates for students. But the federal government offers far lower rates on loans every single day — they just don’t do it for everyone. Right now, a bank can get a loan through the Federal Reserve discount window at a rate of less than one percent. The same big banks that destroyed millions of jobs and broke our economy can borrow at about 0.75 percent, while our students will be paying nine times as much as of July 1.
This is not fair. And it’s not necessary, either. The federal government makes 36 cents on every dollar it lends to students. Just last week, the Congressional Budget Office announced that the government will make $51 billion on the student loans it issued this year — more than the annual profit of any Fortune 500 company, and about five times Google’s yearly earnings. We should not be profiting from students who are drowning in debt while we are giving great deals to big banks.
That’s why we introduced the Bank on Students Loan Fairness Act. The bill gives students the same deal that we give to the big banks by allowing those who are eligible for federally subsidized Stafford loans to borrow at the same rate offered to banks through the Federal Reserve discount window. For one year, the Federal Reserve would make funds available to the Department of Education to make these loans to our students. This would give students relief from high interest rates while giving Congress time to find a long-term solution.
Student Loan Rates Should Not Increase, Americans say in Poll
A vast majority of voters want Congress to maintain the interest rates on federal student loans at their current level or lower them, a poll released Tuesday found.
The poll, conducted June 11 and 12 by Public Policy Poling and commissioned by the liberal group MoveOn.org, shows 83 percent of respondents want to keep student loan rates from increasing, an opinion that holds constant across party lines. Almost two-thirds support lowering interest rates to 0.75 percent, the rate at which banks can borrow from the U.S. Treasury. In May, Sen. Elizabeth Warren (D-Mass.) proposedlowering student loan rates to that level with the Bank on Student Loan Success Act.
A petition, hosted by MoveOn, supporting Warren’s bill has received more than 442,000 signatures in the past month. Although Warren’s bill isn’t expected to go for a vote in the Senate any time soon, her proposal collected bipartisan support in the poll, including 56 percent of Republicans who said they approve.
Interest rates on new subsidized Stafford loans, which account for one-quarter of all federal student loans, are scheduled to double from 3.4 percent to 6.8 percent on July 1 unless Congress acts. Current outstanding federal loans, private student loans and other forms of financial aid like Pell grants will not be affected.