'Obscene': Bipartisan Effort to Profit on Student Debt Blasted by Critics
'We should not go along with any plan that demands that our students continue to produce huge profits for our government'
The White House calls it a "win for students," but critics of a bipartisan-backed bill heading for passage in the Senate say the US government should not be profiteering on the backs of students and that better alternatives exist.
In its statement in support of the Senate deal, which will tie federal college loan rates to the ten-year Treasury note, the Obama administration urged swift passage of the agreement it says will "keep student loan interest rates low this year."
"Making billions and billions in profits off the backs of students is obscene." --Sen. Elizabeth Warren
But according to progressive Senator Bernie Sander (I-VT), the president puts too little emphasis on the phrase "this year," arguing that though its true savings will be seen this year, the costs to students in ensuing years—as the interests rates steadily grow—will gobble up any initial savings.
“The White House is being disingenuous and is trying to sweep under the rug big increases in interest rates for students and parents in the near future,” Sanders said. “Because college costs are out of control and interest rates are rising, students are leaving college deep in debt or in some cases choosing not to continue their education because they cannot afford it,” Sanders added.
“This is really more of a missed opportunity than a cause for celebration,” lamented Lauren Asher, president of the Institute for College Access and Success (TICAS), in an interview with The Nation magazine. “It is going to cost families more over the next ten years than if we’d left current rates in place.”
Senator Elizabeth Warren (D-MA), whose plan to give students the same access to cheap government loans that Wall Street banks enjoy was repeatedly scuttled, says the idea that US government will use usurious interests rates on students to raise revenue should be an affront to all Americans.
"We should not go along with any plan that demands that our students continue to produce huge profits for our government," Warren said from the Senate floor last week. "This is wrong."
"Making billions and billions in profits off the backs of students is obscene," she said.
Citing figures from the Congressional Budget Office, Sanders argued that the pending deal would force interest rates up to 7.25 percent for undergraduate loans in less than five years, and that over the life of the loan, on average, the cost would be $5,462 more than those initiated over the last two years. By 2018, he said, students could be facing rates as high as 9.7 percent on their federal college loans.
“At a time when the average student is graduating from a four-year college $27,000 in debt, when hundreds of thousands of capable young people no longer see college as an option because of high costs and when the U.S. is falling further and further behind our economic competitors in terms of the percentage of young people graduating from college, no agreement should be passed which, over a period of years, makes a bad situation worse and will make college even less affordable than it is today,” Sanders said.
“At a time when Democrats control the White House and the U.S. Senate, we should not support bad legislation almost identical to that passed by a very conservative, Republican-led House."
Over the longterm, said Warren, Congress should focus on three things that would actually improve the student loan program and the cost of higher education:
• First, eliminate government profits from new student loan programs - period.
• Second, refinance existing student debt to reduce the profits that are crushing our young people.
• And third, reduce college costs so that American families can pay for college without burying themselves in debt.
Watch Sen. Warren's full floor speech against the pending legislation here: