Sen. Elizabeth Warren (D-MA) is reigniting a battle over student loan interest rates that infused the campaign trail last year and put Republicans in a predicament with young voters.
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’s first-ever standalone legislation, introduced Wednesday, 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.
The freshman senator’s goal is to jump ahead of the debate over student loan rates in Congress and re-frame it with a populist flavor. She said she hasn’t yet spoken to the White House or Democratic leadership and wants to build grassroots support for her cause first.
“The taxpayers are investing in the big banks,” Warren said. “I think the taxpayers should invest in our students. And so I just want the same great deal for both of them.”
Keeping student loan interest rates low has typically had bipartisan appeal but was caught up last year in the larger debate over revenues and spending. Congress eventually agreed on a one-year freeze on loan rates at a cost of $6 billion. That freeze expires in July.
A study this year by the Congressional Budget Office found that for every dollar the federal government offers in student loans, it makes 36 cents in profit.
Warren concedes that her proposal is “not a permanent fix for the student loan problem” but hopes that it give Congress time to find one.
In her floor speech unveiling the legislation Wednesday, she said that if no action is taken, “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. That isn’t right.”