NEW YORK (MainStreet)—Senator Elizabeth Warren (D-Mass.) is gathering support for her bill to lower federal student loan interest rates to the level of the fed funds rate, but so far there hasn't been any movement on the one-year time frame.
A House bill that is a companion to The Bank on Students Loan Fairness Act, which drops the rate on federally subsidized Stafford loans from the Department of Education, has been introduced in by Rep. John Tierney (D-Mass). Warren's bill already has a co-sponsor in the Senate by Jeff Merkley (D-OR).
"Right now, a big bank can get a loan through the Federal Reserve discount window at a rate of about 0.75%," she said Thursday in an email blast to supporters. "Those are the same big banks that destroyed millions of jobs and nearly broke our economy. That isn't right. And that's why I introduced legislation to give students the same deal we give to the big banks. This was my very first bill in the U.S. Senate, and I'm going to fight for its passage."
According to Warren's statement, The Bank on Students Loan Fairness Act would allow students who are eligible for federally subsidized Stafford loans to borrow at 0.75%. "For one year, the Federal Reserve would make funds available to the Department of Education to cover the loans and give students relief from high interest rates while giving Congress time to find a long-term solution," she said. That solution may leverage the difficulty Congress would have in replacing what may become a popular piece of legislation—one that involves a reduction in student loan interest rates—with one that may be extremely unpopular 12 months later—a rate hike.
Tierney engaged this issue with a May 14 op-ed in the Lowell Sun. Kevin McDermott, Tierney's Washington, D.C. based legislative assistant could not be reached for comment.
--Written by John Sandman for MainStreet