Sen. Elizabeth Warren (D-Mass.) has a plan to ease the student-debt crisis: She introduced a bill on Wednesday that would let college students take out loans at the same rate banks get when they borrow from the Federal Reserve. The rate on Stafford subsidized loans is set to double in July to 6.8 percent; financial institutions low on cash can get short-term loans at a sharply lower rate — currently 0.75 percent. Warren wants to give students the special bank rate for a year so Congress can work out a long-term fix.
Warren, a longtime consumer advocate elected to her first term last year, said the bill — her first — is just a simple attempt to be fair. "The federal government is going to charge students interest rates that are nine times higher than the rates for the biggest banks — the same banks that destroyed millions of jobs and nearly broke this economy," she said. "That isn't right."
Liberal commentators agreed. It's "a damned good thing" students have Elizabeth Warren looking out for them in Washington, says Joan McCarter at Daily Kos. They're already overburdened with debt, and their plight will only grow more dire if Congress lets their loan rate double, McCarter says. Warren's plan to give them the same sweetheart deal banks get would be a welcome break. Imagine that, says Robyn Pennacchia at Death and Taxes, granting students the same "comfy 0.75 percent interest rate" that rich corporations get. "Elizabeth Warren is the best, she's just the freaking best."
Not everyone shared the same glee. Banking lobbyists, for example, were not pleased. Patrick Sims, a director in policy research at Hamilton Place Strategies, said it was unfair to compare emergency lending rates that have helped banks through moments of financial crisis to student loans that can be repaid over many years. "Using something completely unrelated and feeding into populist animosity toward large banks to increase the sympathy for the student loan body or students in general, it just kind of sounds like a weird way to legislate," Sims tells Politico. "I don't know if it necessarily helps our student loan situation in the United States today."
It's unclear how many lawmakers will support Warren's proposal. Some Democrats simply want to extend the 3.4 percent rate for another year, as Congress did last year when President Obama made the looming Stafford rate hike a campaign issue. Some Republicans favor a proposal to let the rate rise and fall with the government lending rate.
If nothing else, Warren is intensifying a necessary debate. "I know when I graduated grad school and law school, a good many decades ago now," says John Aravosis at America Blog, "I was already $60,000 in debt." He also notes that he had friends who "were $120,000 in debt" and that his "monthly loan payment was equivalent to my rent." For Aravosis that meant putting off major financial milestones, like buying a home, until age 40 or beyond. "There was a lot of opportunity cost to taking out those loans — and a lot of benefit too," he adds. "But it's still absurd the amount of debt we're forced to take on in this country, simply to get an education."