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.
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.