WASHINGTON Sen. Elizabeth Warren, D-Mass., introduced a bill Wednesday that would match student loan rates to those the big banks get.
The Bank on Students Loan Fairness Act would temporarily allow students eligible for federally subsidized Stafford loans to borrow at the same interest rate that the largest institutions receive through the Federal Reserve discount window. Warren said the bill, which would be in effect for a year, would give Congress time to address rising student loan interest rates.
Federally subsidized student loans are set to jump from 3.4% to 6.8% on July 1, unless Congress passes another temporary measure holding them steady or finds a long-term solution. Under the bill, the Fed would be directed to allow the Department of Education to borrow at the same rates as big banks so that it can lend to students.
"Right now, a big bank can get a loan through the Federal Reserve discount window at a rate of about 0.75%. But this summer a student who is trying to get a loan to go to college will pay almost 7%," Warren said Wednesday on the Senate floor. "In other words, 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."
The bill is likely to get some play at a hearing next week on the private student loan market in the Senate Banking Committee. Witnesses from the Consumer Financial Protection Bureau and the Federal Reserve Bank of New York are expected to testify, a committee spokesman said.