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Why Can’t Students Borrow at the Same Rates as Banks?

Why Can’t Students Borrow at the Same Rates as Banks?

How serious of an issue is student loan debt? In the United States alone, student debt is poised to hit the $1 trillion mark soon. Stafford loan interest rates will double to 6.8% in a couple of months if Congress doesn’t act. Many expect that student loan debt will be responsible for an upcoming economic crisis.

American’s young adults are crippled by this debt. Having been told that going to college is the responsible choice, they accept tens of thousands of dollars in loans that haunt them for years if not decades to come. Lower interest rates would certainly alleviate some of this financial burden, but you’ve got to charge significant interest to make lending money worthwhile.

Well, unless you’re one of the countries largest banks. The government is happy to loan to their toxic BFFs at the low rate of just 0.75%. It seems fair to give the wealthy the nicest financial breaks while saddling America’s youth with massive debt, right?

Enter freshman Senator Elizabeth Warren, who has already made a name for herself by standing up to the corrupt banks and calling a spade a spade. As TPM reports, Warren has proposed legislation that would allow students to borrow money at the same rate that the large financial institutions are offered.

“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,” Warren said, adding, “That isn’t right.”

The government typically justifies its loan deals to the banks by citing that giving these institutions money is an investment in the country’s economy and future. But using that logic, shouldn’t students fall into the same category? Why is educating our up-and-coming generations and providing them with a ticket to financial stability not considered an equal investment in the country’s economy and future?

Warren is taking a novel approach to her legislation, as well. Rather than first seeking her party or the President’s approval like most high-ranking politicians do, she’s floating the idea to the public first, in the hopes of gaining widespread support. It’s probably a smart decision on Warren’s part. The average American is bound to see the common sense in this proposal, whereas the powers-that-be are bound to find an excuse to shut it down.

As it stands, the American government profits greatly from student loan debt. The Congressional Budget Office determined that the government makes 36 cents in profit for each dollar it loans to college students. Additionally, the banks – those same corporations that are gifted minuscule loan rates – have also exploited higher education for profit. For example, Goldman Sachs found that by pressuring high school graduates to enroll in schools they cannot afford, it could profit for decades to come off of their student loan payments.

Though still in early stages, Warren hopes her proposal can be adopted before the current student loan plan expires in July. While she acknowledges it is a temporary fix for a much larger problem, it is a step toward ensuring that young people seeking an education aren’t sidelined with a lifetime of debt.

 

Related Stories:

Student Loan Debt Could Cause the Next Financial Crisis

Student Debt Rises 8% to $904 Billion

How Goldman Sachs Exploits Student Debt for Profit

 

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Photo Credit: Edward Kimmel

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6:48AM PDT on Jun 8, 2013

What I do not understand is this. I pay tens of thousands of dollars in taxes every year and I do not have kids in school. So, why is it that qualified students cannot get a free education?

Think about it! A lot of those taxes are specifically earmarked for education. Therefore, if I do not use or benefit from them, and neither does my family, why is it that they are not used for the benefit of those students that deserve it?

Oh, yes! I am sorry! It is more important that some politicians get their perks instead of hard working student getting a free education

4:47PM PDT on May 20, 2013

I have been fortunate enough not to have to take out loans, but plenty of my friends have. I hope Ms. Warren's proposal goes through.

11:38PM PDT on May 18, 2013

Don H. - I show that video in all of the Political Science and Sociology courses I teach.

9:10PM PDT on May 18, 2013

Kevin B said

"Sarah H. the loans are guaranteed by the federal government, the banks get paid either way."

Sarah, there is no greater investment than the investment in the education of the citizen. Of course the "righties" have a history of promoting ignorance.

It looks to me that the GOP and sundry "righties" are doing their best to dummie down the citizenry of the U.S. They have done this through their drive to defund education.

Of course in Sarah's mind thing are just peachy the way they are! Watch this F'in video.

http://www.youtube.com/watch?feature=player_embedded&v=QPKKQnijnsM

12:54PM PDT on May 18, 2013

Sarah H. the loans are guaranteed by the federal government, the banks get paid either way. Oh and since when did bank become so good at paying back loans? I just seem to remember a few years ago when the federal government had to "bail out" all the big banks. Surely you saw it? It was all over the news.

4:47AM PDT on May 18, 2013

Elizabeth Warren is an idiot! Students are NOT banks. Their loans are more likely to not be paid back. What if they don't get a job, especially in this economy? My husband has been out of work for a year and a half. He has over 30 years of work experience, so we think that all the college graduates coming out into the work force are going to get jobs? My son graduated from a trade school and can't get a job as a mechanic, he's working as a landscaper. He also has years of experience from his years in the Army and reserves.

3:39PM PDT on May 16, 2013

Elizabeth Warren for President 2016!

The regressive Republican Party of No is obstructionist, mean-spirited, thuggish, religiously fanatical, scientifically ignorant, corrupt, hypocritical, untrustworthy, xenophobic, racist, sexist, homophobic, evolution and global warming denying, oily, anti-environment, anti-health, anti-consumer, anti-choice, anti-birth control, anti-education, anti-student loans, anti-equal pay, anti-99%, pro-banks, pro-big corporations, pro-voter suppression, pro-guns, union busting, Medicare mashing and Social Security slashing, fiscally irresponsible, misleading, authoritarian, selfish, greedy, out-of-touch, dishonest, lacking compassion, warmongering, and otherwise dangerous.

NEVER vote for Republicans!

11:04AM PDT on May 15, 2013

Face it, it's a fact, a very sad fact our young are SCREWED!!!
Thank you Kevin.

11:02AM PDT on May 15, 2013

Face it, it's a fact our young are SCREWED!!!
Thank you Kevin.

10:11AM PDT on May 15, 2013

All these banks in their present form know how to do is start profitering wars, bankrupt governments, throw people out of their homes, and jobs. http://www.youtube.com/watch?v=5hfEBupAeo4

Senate Warren does good to call for a 3.4% interest rate for student loan. But the horse have already escaped the barn and now she is trying to close the stable door a bit. Students are faced with debts approaching a $1 trillion. All student loans need to be forgiven just like the banks were bailed out. She also needs to call for the federal reserve to be abolished and call for congress to coin the US money.

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