Sen. Warren bill reduces student loan rates

BOSTON (WWLP) — The U.S. government is forecast to make a record $51 billion dollar profit this year from student loans according to the Congressional Budget Office. U.S. Senator Elizabeth Warren argues profits shouldn’t be made from students and the interest rate on student loans should be the same as big banks.

On July 1 st , the interest rate on some new federally subsidized student loans will double from 3.4 percent to 6.8 percent. Warren has filed legislation that’s being backed by Massachusetts education leaders to reduce student loan interest rates to 0.75 percent for students from low-income families.

“Surely our kids are as important to us as our banks,” said Warren.  “Federal government is out there lending money at less than one percent to large financial institutions.  It does that because it says it’s necessary to invest in those institutions to invest in our economy.  Well we believe it’s necessary to invest in our students.”

But critics worry Warren’s legislation will encourage students to incur greater debt and discourage colleges from keeping costs down.

“I think that’s always a problem, you know it’s sort of a natural evolution of things, if you make money very cheap than people are more than willing to take more and more of it.  So I do think we need to keep a cap on how much the students can borrow,” said University of Massachusetts President Robert Caret.

Warren’s bill would only apply to new loans and would be effective for one year. Critics argue the legislation is more political theater than a solution. 

“I don’t think it’s a gimmick, I think it’s a great starting point and I think the most important thing we’re doing today is we’re bringing attention to this issue,” said Rep. Paul Mark (D-Peru), who supports Warren’s initiative.

Senator Warren could not clarify how much the low interest loans would cost taxpayers.

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