Economy

Senator Elizabeth Warren is Mad About Student Loan Debt; Here's Why

October 27th 2014

By:
ATTN: Staff

Senator Elizabeth Warren was on Real Time with Bill Maher this weekend, and discussed a little-known fact: the government profits billions of dollars from student loans. As she said, "right now, this country is taxing young people who are trying to get an education and taxing them to say you have to pay extra (unless you are born into a family who can just write a check for college); and you know why you have to pay extra? So that we can keep tax loopholes open for millionaires and billionaires. This is about as wrong as it gets."

Watch the clip here:

Two weeks ago, attn and Our Time co-founder Matthew Segal also appeared on Real Time with Bill Maher and discussed the student loan debt crisis as well. You can watch the clip here:

 

 

As we've said many times, the student loan debt crisis affects every American citizen because when the average college enrollee owes more than $25,000 upon graduating, the likelihood of saving for cars, homes, or other important consumer goods becomes untenable. This impacts our entire economy-- not just students. In September, the U.S. Senate voted on legislation to allow borrowers to refinance their student loans. The bill, sponsored by Senator Elizabeth Warren, is called The Bank on Students Emergency Loan Refinancing Act. To understand it better, we interviewed a higher education expert and advocate, Natalia Abrams, who is the executive director and co-founder of Student Debt Crisis-- a non-profit organization dedicated to reforming the way we pay for higher education in America.

Q. What exactly is the Bank on Students legislation, and who does it impact?

The Bank on Students Emergency Refinancing Act is a bill that would allow borrowers to lower their interest rates by refinancing their student loans. In 2013/2014, Congress lowered student loan interest rates by tying them to U.S. Treasury notes. The big miss was that 25 million Americans took out their loans before 2013, and are still being crushed by huge interests rates, are currently ineligible. Sen. Warren’s bill would make these borrowers eligible and bring down interest rates for Americans who chose to refinance.

Q. Why is refinancing student loans important and what's the argument against refinancing?

The average borrower could save over $2000 by refinancing. That is the down payment for a car, it's savings to start a family, and it's the extra bit of cash that could have gotten Americans approved for a home loan. Refinancing student loans is the simplest way that we can ease the burden of high interest rates. Refinancing has been an option for people who take on other kinds of debt, and its crucial that student loan borrowers be given the same protection. Warren's bill would make up for a shortfall in interest revenue by raising taxes on earners making over $1,000,0000 per year. This is the main objection to her bill.

Q. Is it true the government profits from student loans? If so, how do they justify this?

Yes, the Federal Government has profited from student debt to the tune of 51 billion dollars a year! To put that kind of profit in perspective, the federal government’s student loan program would make it the most profitable company in the world. To quote Sen. Warren, "It's OBSCENE!". The Department of Education has responded with a very cliche response- we’re just doing the math wrong. However, these figures are published yearly by the Congressional Budget Office, and represent the most accurate accounting available to the federal government.

Q. Does the Bank on Students legislation do anything to address rising college costs -- or only student debt?

The Bank on Students Act is aimed at 1.2 trillion dollars of existing student debt, because our country faces many economic problems if we don’t make student loans more manageable. The bill is one of the strongest we've seen to focus on past borrowers, and Senator Warren knows that these people need help now. She has acknowledged that we need to do more to drive down the cost of college, and surely making college more affordable is an important issue for anyone who wants general higher education reform. Even if college was made free tomorrow, our country would still have to solve the student debt crisis for the 40 million student loan borrowers already in debt. Driving down the cost of college is a crucial way in which we can lower the amount of student debt in the future, but we must not forget those who are already impacted and in need of assistance.

Q. What can I do about this? Is there really anyway I can have an impact?

With any political issue there are simple fundamental ways in which you can get involved. We encourage everyone to call their Senators and tell them you want student loan refinancing. Tweeting your Senators and following them on Facebook are other simple ways one can keep the pressure on politicians. Creating a powerful voice in support of reform is key, so using social media to share this issue with your friends and family is a great way to strengthen the public demand for change. Also, it is important to know that there are many people who are already passionately calling for student loan refinancing and reform. Higher Ed Not Debt is hosting “UnHappy Hours” across the country where students and borrowers are meeting for drinks, socializing, and stimulating conversations about how we can fix the student debt crisis. Also it is important to engage in discussions with the community; this is one of the most important ways to motivate people and create real change for themselves and others.

You can also sign our petition in support of student loan refinancing HERE.