MARK KARLIN, EDITOR OF BUZZFLASH AT TRUTHOUT
Sen. Elizabeth Warren (D – Massachusetts) once again brings a rare commodity to the US Senate: common sense.
In her first standalone piece of legislation, Warren wants to require that student loans are offered at the same rate that banks pay (currently 0.75 percent from the Federal Reserve).
In her Senate remarks introducing The Bank on Students Loan Fairness Act, Warren bluntly states her rationale: "If the Federal Reserve can float trillions of dollars to large financial institution, surely they can float the Department of Education the money to fund our students, keep us competitive, and grow our middle class."
Needless to say, Warren has her priorities straight when it comes to investing in the future of America. It is our higher education system – now deteriorating due to austerity measures and rapidly escalating tuition – that built the foundation for US skills and innovation in the private and public sectors.
That is why Warren succinctly stated in her floor speech:
Let’s face it: Big banks get a great deal when they borrow money from the Fed. In effect, the American taxpayer is investing in those banks. We should make the same kind of investment in our young people who are trying to get an education. Lend them the money and make them to pay it back, but give our kids a break on the interest they pay. Let’s bank on students.
Warren pointed out in her remarks the inequity of priorities when banks pay 1/9th the interest rate to borrow from the US government as compared to students who need loans to pay tuition.
On July 1, without action from Congress, Stafford loan interest rates for some 7 million students are set to double from 3.4 percent to 6.8 percent….
Warren…would prevent that hike and take the additional step of cutting the rate to 0.75 percent — the same rate that big banks are allowed to borrow at — for one year until Congress can achieve a more permanent fix.
“Our students are being crushed by debt,” Warren told TPM in an interview late Wednesday.
Under her legislation, the Federal Reserve would float money to the Department of Education, which would provide federally guaranteed student loans at 0.75 percent for all those who are currently eligible for them — at the same rate it offers banks.
What's astonishing is that the US government makes a profit on student loans, according to Warren: "Some may say that we can’t afford this proposal. I would remind them that the federal government currently makes 36 cents in profit on every dollar it lends to students. Add up all of those profits and you’ll find that student loans will bring in $34 billion next year."
The toll on students and their future down paying of college debt is crushing many Americans financially: "Today’s graduates collectively carry more than $1 trillion in debt – more than all the outstanding credit card debt in the whole country," Warren warned in her Senate speech. "Doubling the interest rate on new student loans will just increase the pressure on our young people."
No, no private enterprise got to where it is on its own. Our system of higher education has been vital to corporations.
But in the name of the wealthy who have built fortunes benefiting from the skilled professional workforce provided by US higher education, the university system is under financial siege due to the austerity drive by the rich and the Chamber of Commerce crowd. Students bear the brunt by borrowing more – as tuition rises -- at double the interest rates for Stafford loans as of this summer.
That's bad for the future of America.
As Warren notes in her catchy slogan: bank on students. They are a much sounder investment in the future of the US than banks too big to fail.
(Graphic: Elixabeth Warren US Senate website)