Massachusetts Senator Elizabeth Warren will reintroduce legislation next month to refinance the 1.2 trillion dollars in federal student loans at a rate of 3.86 percent. In an interview last night with MSNBC’s Rachel Maddow, Warren announced she will propose an altered version of her Bank on Students Loan Fairness Act, which she introduced last spring. The Bank on Students Loan Fairness Act sought to lower federal student loan interest rates to the primary credit rate charged commercial banks by the Federal Reserve.
Warren’s Fairness Act was proposed just as interest rates on subsidized student loans were set to double with the expiration of the College Cost Reduction and Access Act. Her bill would have prevented the rate increase and ensure that, in the future, students would have the same credit advantage as bankers. Congress instead voted to link student loan interest rates to the rates paid on Treasury notes. The Consumer Financial Protection Bureau, an agency built by Warren under the authority of the Dodd-Frank Act of 2010, estimates federal student loan rates will increase by nearly 1.25 percent this July.
According to Warren, “The federal government makes tens of billions of dollars in profits off the backs of kids who are trying to get an education.” Warren sees the system as rigged to favor corporations and billionaires “who can hire armies of lobbyists and lawyers” to push legislation that favors their pocketbooks. She credits her own career success with the availability of a low-cost education. Warren says that prior to the 1980s, education funding was a priority and it provided the opportunities that built a strong middle class. Since then, funding has been cut to give tax breaks to businesses.
“It’s all about choices …we can choose to support billionaires or we can choose to support kids who are trying to get an education. The way that we spend our money as a country should reflect our values.” — Sen. Elizabeth Warren
The legislation she plans to introduce next month would refinance outstanding student loans at 3.86 percent. For students carrying loans at 6.8 percent, this would nearly halve the total interest they would pay over the life of a loan. The burden of student loan debt places a drag on the economy as the young debtors are unable to finance purchases for consumer products, vehicles or homes.
In the Maddow interview, Warren says her new legislation will be paid for by adopting the Buffett Rule, which raises the marginal tax rate on income in excess of $1 million dollars. The rule was proposed by, and named for, businessman Warren Buffett. In an August 2011 New York Times opinion piece, Buffett noted that although he is “mega-rich”, tax breaks offered the wealthy make it possible for him to pay a lower income tax rate than his office workers.