Sen. Warren: The U.S. Gov’t Shouldn’t Treat Students Like ‘Profit Centers’

BOSTON — Some student loan interest rates are going up, effective today (Monday).

That’s because Congress began a nine-day recess Friday without coming up with a way to prevent the interest rate on new federal Stafford loans from doubling from 3.4 percent to 6.8 percent, as of July 1. The rate was set to jump last summer but Congress postponed the increase for a year, and Monday marked the end of that year.

Massachusetts U.S. Sen. Elizabeth Warren has introduced legislation that would temporarily set the interest rate on Stafford loans to coincide with the rates that banks receive from the Federal Reserve, meaning it would drop to a very low .75 percent. WBUR’s All Things Considered host Sacha Pfeiffer spoke to Warren about the prospects for that legislation.

Sen. Elizabeth Warren, in a March 7 file photo (Cliff Owen/AP)

Sen. Elizabeth Warren, in a March 7 file photo (Cliff Owen/AP)

Elizabeth Warren: Well, you know, until this thing gets settled we don’t know for sure.

But I sure think it raises exactly the right issue, and that is every time the United States government makes a loan at a low interest rate, it is investing in whoever gets that loan. We make those investments every single day in the largest financial institutions in our country by making low-cost loans to them, and my view is we should be making the same kind of investment in our kids who are trying to get an education.

Sacha Pfeiffer: Do you think that there is actually a possibility of that bill passing and the rate dropping to 0.75 percent?

I think that we haven’t gotten it resolved. I think it’s still on the table. But, look, right now I’m perfectly willing to support the one that just says give us a year at 3.4 percent. Do something not to crush our kids.

But the big issue is the long-term issue; it’s the trillion dollars of outstanding debt. We need to buy some time and then attack that problem head-on. We’ve got literally tens of millions of families that are struggling with student loan debt. And the United States government — it’s scheduled to make $51 billion in profits this year and $184 billion in profit just on the new loans over the next 10 years. What we want to do is we want to make investments in our kids, not treat them as profit centers. That’s just not right.

If you are able to pass legislation that would extend the current rate of 3.4 percent for another year — that already was done a year ago. So it would be the classic kicking the can down the road yet again. You came in really wanting to change the system. Would you be frustrated to see just a one-year extension again?

Well, let’s face it: Last year, after they passed the one-year extension, nobody got organized and said, “Now we need to take on the larger question of a trillion dollars’ worth of debt.” We are making that a priority. We’re making the question of all of the student loan debt outstanding a priority and saying this is a one-year patch. We all acknowledge that. But we need to take on the larger question of all the debt — and, I should add here, also the question of the rising costs of college.

What’s your frustration level about not having been able to get traction on the loan issue so far?

Let’s see, on a scale of 1 to 10, I’d put it at about 14.

Really? So it’s high for you? It really is?

Yeah, it’s very high. Come on! We knew it was here. I’ve been talking to people about this for months. And there have been others who have been doing the same. But it’s just been one of those things that you just couldn’t get traction until we were in emergency territory: The interest rate is about to double.

You came into the Senate wanting to be very aggressive about forcing change and, I think, somewhat idealistic. I’m wondering whether so far, in your brief Senate career, you’ve found things more intractable than you expected, and do you really think you can do what you had hoped to do?

Hey, look, I’ve been here six months and now we’ve got a big national issue. We’ve got people who are paying attention to this issue around student loans. I get it that change doesn’t happen immediately. Dang, I wish it did. But the point is, that is change. People are out there talking about it. People are saying, “Wait a minute, I don’t like this. This isn’t what I want.”

On the other hand, despite how intractable the situation on Capitol Hill has been in recent years, how do you think the Senate was able to strike a deal on the immigration bill last week?

People worked for months and months and months, and each side got some of what it wanted. Nobody got a perfect bill, but everybody got a piece of what really, really mattered to them. I’m hopeful that that is a model that we can use when we talk about student loans.

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  • Kpaqu1

    Says the $350,000 a year part-time “professor.”

    • jefe68

      She’s not on the Law School roster according the Harvard Law School web site.
      You’re right wing smear job failed. The level of immaturity is noted.

      • Kpaqu1

        If you have the facts, pound the facts. If you have the law, pound the law. If you have neither, pound the table.

        • jefe68

          If have nothing post inanity.

  • Thinkfreeer

    Great. We’ve got a lot of problems to solve. Student loan interest rates isn’t one of them. But that’s the most important thing she has to do?

    • northeaster17

      It appears to be an easy fix that would make adifference in many young peoples lives. But then predatory banks are probably right up you alley. Till you get screwed over or until your next bailout.

      • pickle

        predatory banks? The schools EXPECT students and families to take out loans. Who do you think has a hand in these loans? Have you ever taken out a student loan?

        • northeaster17

          I have and now my children. The banks got what they wanted with the 2006(?) bankruptcy overhaul and now they can offer loans at twice the normal rates. Would you buy a house today at 6%, a car? Students have a limited window for education so the loans are more than many can pass up. So what happens. They get the highest rates and the least forgiving repayment rules. Supporting the banks on this is like eating your own. Which is exactly whats happening.

          • pickle

            You see the problem as the banks, I see it as the schools. It’s not like you go to the bank and take out any loan, this is a student loan. Often the banks/loans are picked for you by the school or government. I guess you could go the personal loan route…

          • northeaster17

            I guess the problem is both but the banks still are able to charge higher rates to students than they can for home or auto buyers. The inability to default was supposed to solve that problem. Instead it made it worse. Schools do cost too much, as do books, but when we refuse to invest in our most important infrastructure, our young, and then take advantage of them with 30yr loan programs bad times are coming for sure.

          • jefe68

            It’s both in my opinion. The schools don’t have control over how the banks are setting up the loans. You seem to think they do, when they don’t.

            The cost issue is now at a critical mass, of course our government and the education institutions are going to do as little as possible and the results will be more dysfunction and most likely the US fast losing ground as a nation of a well educated populace. Which some might view as something some sectors of the political spectrum want. Nothing worse than a well educated population.

          • pickle

            I’m not aware of any part of the political spectrum wanting an uneducated workforce. Have you ever filled out FAFSA? It’s a federal form and from that is where the scholarships, grants and loans come from. I did not apply directly to any bank for a student loan, it was all “assumed” from FAFSA and the school itself. There is a relationship there, and I wonder where in the process is it chosen which bank to borrow from-since it is not actively chosen by the borrower.

      • Thinkfreeer

        No, no, and no

    • TomK_in_Boston

      Nice for you that it’s not a problem for you. Unfortunately one of the huge changes as Reagan voodoo econ takes us from a middle class society to an oligarchy is that kids used to graduate with little or no debt and now it’s expected that they have big debt. What a horrible development!

      • pickle

        As a parent helping a child with student loans, Warren still expects students and families to fork over to keep the money flowing to the schools. Admit, she is not addressing the root cause of the problem, why are the tuition rates so high? Have you seen a breakdown of what you’d be paying for? There is a “fee” for everything. It’s a shakedown of students, plain and simple. No one expects a kid to start out in life with such enormous debt and any parent should try to talk some sense into their kids. Most degrees don’t pay off and jobs are hard to come by.

      • Thinkfreeer

        I did not say that it wasn’t a problem for me. I said is wasn’t a problem, period. Anyone who actually complains about paying 6.8 % interest shouldn’t borrow money.

        • TomK_in_Boston

          Going from a society in which students graduated without debt to one where they graduate with big debt is a huge change for the worse and a poster board for the unwinding of our middle class society.

          • Thinkfreeer

            I graduated in 1975 with a debt that seems small today, but took me 10 years to pay off, as many others did. Your premise is false.

          • TomK_in_Boston

            It is not false. It is broadly true. Using individual anecdotes to contradict a trend, (like “cold today, so much for global warming”) is a dishonest tactic.

  • pickle

    Wow, so she still expects students and families to go into debt and fork over 80+ grand for a 4 yr degree? Instead of concentrating on interest rates for loans, she should look at why are colleges so expensive? Why do part time professors get paid 300 grand a year for ONE CLASS? Is all that overhead in administration really needed? Why do books cost $200 for one book? Na, shes got to protect academia, especially since they’ve been so good to her. What a fraud.

    • TomK_in_Boston

      You missed how tax cuts have states not supporting State U, which used to be essentially free, and now have rising tuition, which reduces any pressure on private U to keep tuition low. Some states now pay less than 10% of “their” universities. Former Pres of U of Mich said “We were state supported, then we were state assisted, and now we’re state located.”

      • pickle

        Again, why do so many administrators make such high salaries with housing and many other benefits? Remember this is all on the backs of students. Have schools (state) even attempted to live within a budget? How often do we hear that some of the highest public salaries are in the state collegees? No, there is more here than interest rates on loans…

        • TomK_in_Boston

          I agree, and IMO #1 is cutting of state support to State U, like I said. I agree #2 is growth of bureaucracy and “corporatization” of unis. You may vent abt salary of “part time professor”, but that’s nothing compared to administrators.

        • yoshipod

          Most administrators do not make really high salaries. Academia tends to have lower salaries as compared to industry for similar jobs.

          Running a major university is very expensive. I work at one and the infrastructure is very expensive to maintain. Many schools have dozens or even 100′s of buildings. They are similar to small cities, with most having their own police force.

          In addition, there are costs for higher salaried employees with specialties such as lawyers, IT specialists (Universities have above average IT infrastructure, and run enterprise level software such as SAP, Oracle, etc.), immigration experts (large portions of the student and researcher population are foreign nationals).

          Universities also have to deal with many more federal regulations than a typical company. FAR and DFAR requirements for conducting research on federal grants and contracts can be very complicated requiring dedicated people who are well versed in these.

          The list goes on and on.

          So while it seems like education is expensive, and it is, its not because universities are simply raising rates for no reason. The cost of running a university is much greater than most would think.

          • pickle

            This has always been, doesn’t explain the surge in increases over the past 30 years. Yes, colleges are a business and need to keep up with technoloies, etc, but what you’re citing is no different than any other large business – remembering that we are in a global economy and the regulations for interstate commerce, not to mention global commerce can be daunting. So no, not convinced business deal with much more government regulations – and more coming. Remember, in today’s society many deem businesses, especially successful ones – the enemy. Academia has been off limits but I think the tide is turning. The highest paid public employees in MA work in colleges, amazing.

    • Richard Hussong

      Yes, college is way too expensive, but the average full-time professor makes about $75,000. Harvard Law salaries are absurd, but mean nothing for the average student. Do you think Warren should have asked Harvard to pay her less?Would you do that?

      Also, what exactly would you have the federal government do about high textbook prices and college tuition? The feds don’t run colleges or publish textbooks. They could make more outright grants instead of loans, but would taxpayers and Congress accept that? I think Warren is doing a decent job just keeping the problem in the public eye.

      • pickle

        Look at the salaries of some of the hightest paid public employees, academia – we’re talking administrators here and there’s many levels of administrators.

        Indeed, someone needs to look at the costs of books forced upon students. I had to fork over $225 for ONE book for one class, one semester. Why does a book cost that much? If anyone really cared about the high cost of education, then they need to look at the relationship between these publishing houses and schools. How do they get away with that? If the government can try to rein in costs of other private industries (see healthcare), then why not?

        And Warren does not impress me, in the least. Keeping this in the public eye? I don’t need her help, each month I get the bills in the mail that sure do keep it on my mind, along with thousands of other familes.

      • Mark Andrews

        One of the reason education cost are so high is the fact people can get loan money and the Universities take advantage of that. Is the education 5 times better than it was 25 years ago? Why does it cost 5 times as much. Education is big business and this will be the next financial meltdown. I do not think the interest rates should go up but I think they should cut the amount of the loan pool by half. This is the only way to get education cost down. I disagree with grants.. going to college is not a right, it is a family decision.

        • jefe68

          So in your view only people who can afford college should go. Funny how in Great Britain before they changed over to a system like ours, grants were how people went to college.
          The cost never went up much when compared to our system.
          How do explain that?

          In Denmark they use taxes to pay for education and as a result students have zero debt and they have a highly educated population. The same is true in Germany.

          Our market based higher ed system is failing much in the same way that our market based health care system is.

          • Mark Andrews

            I guess I am just trying to fix the problem. The problem is the cost of education. Until we fix that I do not think we should throw more money at the system. It does not have to be this expensive – it is supply and demand. In the grant systems only the smartest people were granted, not everyone.

          • jefe68

            In GB you had to take A levels and then if you were able to get into a college or university you received a grant.
            That no longer happens.

          • TomK_in_Boston

            It’s funny, we used to be proud of the unique USA system where so many kids could go to college and move up the ladder, and pat ourselves on the back about how in old europe only the elite could do that, while the rest were stuck in the niche they were born in. Not much doubt about the direction we’re headed in – old europe here we come.

    • jefe68

      That’s a good point, but to attack Warren on trying to help bring the interest rates down is hardly a good way of making it.

      You’re not helping the argument by attacking the professors, it’s the administrations, building projects and in some cases sports teams that are the real culprits in the huge cost spikes in college costs.

      Add to that that states have been slashing budhets for state universities for years forcing them to rais their tuition beyond the reach of the very people who need affordable education.

      The text book thing is one that needs to be looked at but in some cases, sciences and engineering for instance, these books are updated all the time.

      Your anger is misplaced.

  • whoa360

    These colleges and Universities have ‘not for profit’ status and receive preferential tax
    treatment. There should be caps on what any university employee should make; they
    are at least indirectly spending tax payer money. If they want to make millions they should go work on Wall Street with the other thieves.

  • TomK_in_Boston

    In addition to states reneging on the commitment to inexpensive public higher education to keep taxes low at the top, there is a much broader impact of Reaganomics at work here. Since 1980 GDP has kept increasing, but middle class wages have gone flat as all the wealth has been diverted to the top. If the income of average Americans had kept increasing like it did in the 50s and 60s, college would be a much smaller burden on a typical family today.

  • lawrene

    All this talk about “subsidized” Stafford Loans going from 3.4% to 6.8% as of July 1. As long as I remember students, once they graduated, were paying 6.8% on their subsidized loans in the payback period. (The exception has only been the last couple of years)

    Unsubsidized loans always carried a 6.8% interest rate while in college.

    So don’t buy into the drama advanced by the District of Criminals.

    Grove City College saw the problem in 1984 and had the guts to stick to its’ principles to come up with the solution.

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