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 shouldnâ€™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 thatâ€™s being backed by Massachusetts education leaders to reduce student loan interest rates to 0.75 percent for students from low-income families.
â€śSurely our kids are as important to us as our banks,â€ť said Warren. â€śFederal government is out there lending money at less than one percent to large financial institutions. It does that because it says itâ€™s necessary to invest in those institutions to invest in our economy. Well we believe itâ€™s necessary to invest in our students.â€ť
But critics worry Warrenâ€™s legislation will encourage students to incur greater debt and discourage colleges from keeping costs down.
â€śI think thatâ€™s always a problem, you know itâ€™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,â€ť said University of Massachusetts President Robert Caret.
Warrenâ€™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.
â€śI donâ€™t think itâ€™s a gimmick, I think itâ€™s a great starting point and I think the most important thing weâ€™re doing today is weâ€™re bringing attention to this issue,â€ť said Rep. Paul Mark (D-Peru), who supports Warrenâ€™s initiative.
Senator Warren could not clarify how much the low interest loans would cost taxpayers.
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