Sen. Elizabeth Warren introduced her first bill in the Senate today, the Bank on Students Loan Fairness Act, which would prevent Stafford loan interest rates from doubling this summer by dropping rates for one year from 3.4 percent to 0.75 percent, the rate at which the government loans money to big banks through the Federal Reserve discount window. If Congress fails to act by July 1 this year, interest rates on Stafford loans reserved for undergraduates will double from 3.4 percent to 6.8 percent.
Though the bill would only quash the hike for one year, Warren noted the short-term solution would allow lawmakers to shift focus to working on a long-term solutions to address the student debt crisis.
"The student debt problem in this country is a quite but a growing problem," said the Democratic senator from Massachusetts. "This will give them relief while giving Congress a chance to find a long-term solution. Doubling interest rates on new loans will just increase pressure on our young people. These young people didn't go to the mall and run up charges on a credit card. They worked hard; they stayed in class; they learned skills; and they borrowed what they needed to get an education."
Warren also proposed moral arguments as to why Congress should act to ensure American student loan borrowers get the "same deal" on loan interest rates as financial institutions do.
"The federal government is going to charge interest rates nine times higher than the rates they charge the biggest banks," she said. "The same banks that destroyed millions of jobs and nearly broke the economy. That isn't right. We shouldn't be profiting from our students who are drowning in debt while we're giving a great deal to the big banks."
"We should be investing in our young people so they can get good jobs and grow the economy," she said.
Last year, when rates on Stafford loans were also set to double, young people mobilized and averted the hike thanks to the successful #DontDoubleMyRate campaign.This year, Campus Progress, though it supports congressional action on preventing the rate hikes on Stafford loans, is also calling on congress to think of long-term solutions to the student debt problem facing 37 million Americans of all ages with the #ItsOurInterest campaign.
One way Congress could lessen the burden for millions of American student loan borrowers is to allow refinancing on their student loans. The idea is simple: By providing student loan borrowers the same benefits that mortgage and credit-card borrowers and even the government have enjoyed during the recession, we could lower monthly payments, give graduates a fair chance to actually pay off debts, and inject more money into our struggling economy.
"Allowing borrowers to refinance their student loans is a critical first step to solving the student debt crisis," Campus Progress' Director Anne Johnson said earlier this year, launching the It's Our Interest campaign. "As we start this new campaign, we call on the White House, Congress, and federal agencies to release their own proposals so we can make this happen and bring relief to millions of Americans and their families."