Udall should endorse Warren student-loan plan

Before Sen. Elizabeth Warren, D-Mass., joined the Senate, Colorado Sen. Mark Udall was a leading voice in favor of keeping student loans affordable by subsidizing interest rates.

At least he was, until his colleague from Massachusetts redefined what “affordable” means.

Udall supported President Barack Obama’s successful effort in 2010 to end subsidizing banks for defaulted student loans, while allowing them to keep their profits.

But rather than end the practice of making needy students a “profit center,” the government simply adopted the model. The subsidized interest rate still contributes to the burden of debt that holds young innovators back, putting the American dream beyond the reach of many educated young Americans.

As The Boston Globe wrote in an editorial, “This is not fair. And it’s not necessary, either. The federal government makes 36 cents on every dollar it lends to students. Just last week, the Congressional Budget Office announced that the government will make $51 billion on the student loans it issued this year ... We should not be profiting from students who are drowning in debt while we are giving great deals to big banks.”

Unfortunately, neither bill currently before the Senate addresses this troubling issue. Instead, their major dispute is over how to offset the cost of student loans.

Udall is an outspoken proponent of S.2343 that would offset the costs of low-interest loans by closing a tax loophole that benefits a few corporate officers.

The counterpart Republican bill (S.2366) would offset the cost of student loans by eliminating funding for disease prevention from the Patient Protection and Care Act.

Otherwise, the competing bills are about rates, percentages, caps and other profit-and-loss issues. Democrats promise lower rates and better terms. The Republicans would shrink subsidies and increase the burden on borrowers — and probably increase government profits on student loans.

In her first bill before the Senate, Warren has challenged the “profit-center” student-loan paradigm. Students should be able to borrow at the same rates the Federal Reserve offers to big banks — presently 0.75 percent — she argues.

Introducing her bill in the Senate, Warren compared the low interest rates the Federal Reserve charges big banks and the much higher rate students must pay for government loans. This summer, students could be paying almost seven percent interest, she points out, while big banks borrow at 0.75 percent.

“In other words, Warren said, “the federal government is going to charge students interest rates that are nine times higher than the rates for the biggest banks — the same banks that destroyed millions of jobs and nearly broke this economy. That isn’t right.”

Just as we invest in big banks, she argues, “we should make the same investment in our young people who are trying to get an education. Lend them money and make them pay it back, but give them a break on the interest they pay. Let’s bank on our students.”

Warren’s bill, which has nine Democratic co-sponsors, “has received an outpouring of support from students and their families, colleges and universities and independent groups,” according to the senator’s website.

Numerous professional organizations and educational institutions have signed on to support the Warren bill. Democracy for America and Move On turned in more than one million signatures in support of the Bank on Students Loan Fairness Act.

Udall should encourage legislation to continue the present student loan rates for another year. This would allow time for the widespread grassroots support for the Warren bill to be heard before any long-term solution is attempted.

It is time to end corporate-sized profits for government and put students first in the student loan business.

Bill Grant lives in Grand Junction. He can be reached at .(JavaScript must be enabled to view this email address).

Before Sen. Elizabeth Warren, D—Mass., joined the Senate, Colorado Sen. Mark Udall was a leading voice in favor of keeping student loans affordable by subsidizing interest rates.

At least he was, until his colleague from Massachusetts redefined what “affordable” means.

Udall supported President Barack Obama’s successful effort in 2010 to end subsidizing banks for defaulted student loans, while allowing them to keep their profits.

But rather than end the practice of making needy students a “profit center,” the government simply adopted the model. The subsidized interest rate still contributes to the burden of debt that is holding young innovators back, and putting the American dream beyond the reach of many educated young Americans.

As The Boston Globe wrote in an editorial, “This is not fair. And it’s not necessary, either. The federal government makes 36 cents on every dollar it lends to students. Just last week, the Congressional Budget Office announced that the government will make $51 billion on the student loans it issued this year ... We should not be profiting from students who are drowning in debt while we are giving great deals to big banks.”

Unfortunately, neither bill currently before the Senate addresses this troubling issue. Instead, their major dispute is over how to offset the cost of student loans.

Udall is an outspoken proponent of S.2343 that would offset the costs of low-interest loans by closing a tax loophole that benefits a few corporate officers.

The counterpart Republican bill (S.2366) would offset the cost of student loans by eliminating funding for disease prevention from the Patient Protection and Care Act.

Otherwise, the competing bills are about rates, percentages, caps and other profit-and-loss issues. Democrats promise lower rates and better terms. The Republicans would shrink subsidies and increase the burden on borrowers — and probably increase government profits on student loans.

In her first bill before the Senate, Warren has challenged the “profit-center” student-loan paradigm. Students should be able to borrow at the same rates the Federal Reserve offers to big banks — presently 0.75 percent — she argues.

Introducing her bill in the Senate, Warren compared the low interest rates the Federal Reserve charges big banks, and the much higher rate students must pay for government loans. This summer, students could be paying almost seven percent interest, she points out, while big banks borrow at 0.75 percent.

“In other words, Warren said, “the federal government is going to charge students interest rates that are nine times higher than the rates for the biggest banks — the same banks that destroyed millions of jobs and nearly broke this economy. That isn’t right.”

Just as we invest in big banks, she argues, “we should make the same investment in our young people who are trying to get an education. Lend them money and make them pay it back, but give them a break on the interest they pay. Let’s bank on our students.”

Warren’s bill, which has nine Democratic co-sponsors, “has received an outpouring of support from students and their families, colleges and universities and independent groups,” according to the Senator’s website.

Numerous professional organizations and educational institutions have signed on to support the Warren bill. Democracy for America and Move On turned in over one million signatures in support of the Bank on Students Loan Fairness Act.

Udall should encourage legislation to continue the present student loan rates for another year. This would allow time for the widespread grassroots support for the Warren bill to be heard before any long-term solution is attempted.

It is time to end corporate-sized profits for government and put students first in the student loan business.

 

Bill Grant lives in Grand Junction. He can be reached at .(JavaScript must be enabled to view this email address).


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