Senator Elizabeth Warren's (D-Mass.) call to lower student loan interest rates to the same "discounted rates" given to big banks has received an "outpouring of support" as organizations and institutions of higher education are lining up to endorse the measure.
The Bank on Students Loan Fairness Act (pdf), the first introduced by the rookie Senator, allows students to borrow at the same low rate—currently set at 0.75 percent—that banks borrow from the Federal Reserve for a year, "providing a window for Congress to find a fair, long term solution on student loan interest rates."
Unless action is taken, the rate of subsidized student loans is set to double from 3.4 to 6.8 percent on July 1.
Congressman John Tierney (D-Mass.) has introduced a corresponding House version of the bill.
"Students are being squeezed... Incomes are down, and tuition is going up." - Joseph Stiglitz, Nobel economist
According to a statement on Warren's site which lists the endorsing institutions, the senator "has received an outpouring of support from students and their families, colleges and universities, and independent groups."
Both Warren and Congressman Tierney have been meeting with the groups to discuss "the moral obligation of investing in students and providing them with the same cheap access to credit that we provide big banks."
"These students and their families have worked hard, saved what they could, and borrowed what they need to pay for higher education," writes Warren in a Boston Globe op-ed earlier this week. "Rather than reward their efforts, the government plans to add to their burden."
Some people say that we can’t afford low interest rates for students. But the federal government offers far lower rates on loans every single day —they just don’t do it for everyone. Right now, a bank can get a loan through the Federal Reserve discount window at a rate of less than one percent. The same big banks that destroyed millions of jobs and broke our economy can borrow at about 0.75 percent, while our students will be paying nine times as much as of July 1.
This is not fair. [...]
We should not be profiting from students who are drowning in debt while we are giving great deals to big banks.
Unlike big banks, students do not have armies of lobbyists and lawyers. They’re banking on us to do what’s right. Let’s bank on students by investing in their futures and giving them a break on student loan interest.
Another voice that has come out in support of the measure is Nobel Prize laureate Joseph Stiglitz, who says that American students are "more dependent on the income and education of their parents than in other industrial countries."
USA Today reports:
"Students are being squeezed," says Stiglitz, who won the 2001 Nobel Prize in economics. "Incomes are down, and tuition is going up." Those who go to public colleges are getting hit the hardest, he says, because of state budget cuts.
Most other industrialized nations make paying for college easier, Stiglitz says. For example, Australia's loan program caps payments as a percentage of income, essentially enabling most people to pay for college without going bankrupt. Many European countries directly subsidize college, although those subsidies have fallen due to the financial crisis.
But saddling students with payments they can't make -- or limiting their ability to attend college at all -- means the U.S. could fall behind foreign competitors. "There is a real risk that this will impede long-term economic growth," Stiglitz says.
This bill is currently assigned to a congressional committee that will consider it before possibly sending it on to the House or Senate as a whole.