New Legislation Sets Student Loan Interest Rate at .75 Percent
May 08, 2013
U.S. Senator Elizabeth Warren (D-MA) proposed a bill today that would set the interest rate for federally subsidized student loans at the same rate as the Federal Reserve’s discount rate to banks ” currently 0.75 percent. On July 1, the interest rate on subsidized Stafford student loans for undergraduate students is set to double, from 3.4 to 6.8 percent, unless Congress acts on an alternative proposal.
The proposed legislation would direct the Fed to make money available to the Education Department for one year at the discount window rate to give lawmakers time to develop a long-term fix.
With the interest rate on federal student loans set to increase dramatically this summer, Warren said that it is unfair that big banks can borrow money at 0.75 percent from the central bank’s discount window.
“In other words, the federal government’s going to charge interest rates nine times higher than the rates they charge the biggest banks ” the same banks that destroyed millions of jobs and nearly broke the economy,” Warren said in introducing her first stand-alone bill since taking office in January.
“That isn’t right,” she said.
Warren’s first bill, which likely stands little chance of passage, takes a swipe at Wall Street while advocating for more government help for average Americans, reports The Los Angeles Times.
Congressional Republicans and President Obama have called for a market-based interest rate based on the government’s cost to borrow, but the interest rate from those solutions would be a few percentage points higher than Warren’s proposed 0.75 percent.
Related Links:
Bank on Students Loan Fairness Act Fact Sheet
https://www.warren.senate.gov/documents/BankonStudentsFactSheet.pdf
The Los Angeles Times
Michelle Cormier Mott
share