Schatz Works With Elizabeth Warren on Legislation to Reduce Student Loan Interest Rates
If Congress doesn’t act, students will pay 9x more in interest rates than big banks
WASHINGTON- Senator Brian Schatz joins Senator Elizabeth Warren (D-MA) in supporting legislation that would allow students to pay the same interest rate on their student loans as big banks. Student loan interest rates are set to double on July 1, 2013, which would cause students to pay 9 times more in interest rates than big banks on Wall Street that caused the economic crisis.
“Student loan interest rates are set to double, and Congress must act so that we reduce student loan rates and make college more affordable,” said Senator Brian Schatz. “Senator Warren is right. It makes no sense that students pay a higher interest rate than the largest financial institutions, and this is totally fixable with our legislation”
“There are two things we need to do for Hawaii’s students. First, we have to prevent the student loan rate from doubling on July 1 of this year. Next, we need to ensure that our young people are treated at least as well, from a borrowing standpoint, as Wall Street banks,” Schatz added.
“If Congress lets student loan interest rates double this summer, our kids will pay rates nine times higher than the big banks on their government loans. That’s wrong,” said Senator Warren. “We should be encouraging our students by investing in their education. Keeping interest rates low not only will help young people who are drowning in debt, but also will strengthen our economy and help grow the middle class.”
Get the facts about The Bank on Student Loan Fairness Act:
The interest rate on federal subsidized Stafford loans is set to increase from 3.4 to 6.8 percent on July 1. If Congress does not act soon, millions of college students will see their student loan payments increase needlessly.
Student loan debt is a growing crisis, and it threatens our economic recovery. Outstanding student loans now total more than $1 trillion, surpassing total credit card debt.
While borrowers struggle to repay their debt, the federal government is making money on its student loan programs. This year, the federal government will make $34 billion on student loans. The government even makes money on its loans to low-income students – 36 cents, on average, for every student loan dollar it puts out. If Congress allows the interest rate on these loans to double, the federal government will bring in even more revenue – money that comes straight from the pockets of college students.
Some argue that it’s too expensive to keep government loans at low interest rates, but the federal government makes low-interest loans all the time – just not to everyone. Big banks can borrow money from the Federal Reserve with an interest rate of less than 1 percent. Through the Federal Reserve discount window, a bank can get a loan at a rate of about 0.75%.
The biggest banks in the country – the ones that wrecked our economy and cost millions of Americans their jobs – pay next to nothing on their debt, while students pay nine times as much.
The Bank on Students Loan Fairness Act lets students take advantage of the same low interest rates offered to banks through the Federal Reserve discount window:
· Sets Interest Rates for Government Loans to Students at the Same Level as Government Loans to Banks. The Act would provide a one-year fix to the impending interest rate hike by setting the rate for federal subsidized Stafford loans at the primary interest rate offered through the Federal Reserve discount window as of July 1, 2013.
· Funded by the Federal Reserve, Administered by the Department of Education. The Federal Reserve would make funds available to the Department of Education to make these loans. While the Federal Reserve would now provide funding, the Department of Education would continue to administer all other aspects of the federal subsidized Stafford loan program in the same manner as it currently does.
For the full fact sheet and bill text, please visit: http://www.warren.senate.gov/?p=press_release&id=83