Warren: Profits from student loans are ‘obscene’
Speaking to young activists on Wednesday, Sen. Elizabeth Warren (D-Mass), didn’t mince words when describing the money the government makes off student loans.
“The federal government will make $51 billion in profits off student loans,” she said at Generation Progress’s Make Progress National Summit . “That’s more than wrong. It’s obscene.”
Warren used her address at the conference of young activists to make the case for her Bank On Students Loan Fairness Act, which she has said would provide a one-year fix to the Stafford loan interest hike that went into effect on July 1. The bill, she said, would allow students to borrow at the same rate that big banks do, a rate around 0.75 percent. The interest rate on federally subsidized Stafford loans has increased from 3.4 to 6.8 percent, while Congress continues to try to come to agreement on the issue.
The rate increase will only affect loans that were issued after July 1, 2012, but overall, educational debt is an issue for approximately 37 million student loan borrowers, with the majority of borrowers in 2012 with outstanding balances less than $10,000.
“Instead of helping our students, the government is making a profit on student loans,” she said. “We can hear some booing at this point.”
Warren claims that the federal government will make $51 billion in profit off student loans. The figure, her office says, is from a Congressional Budget Office spreadsheet, though technically the CBO was measuring “negative subsidies,” not profits. The Post’s Fact Checker reported that the CBO actually has concerns about Congress’s accounting method and that the figure should be cited with caution.
But Warren got the boos she sought after elaborating on the profit and criticizing Republican senators who she said sell ideas to students in the vein of “teaser rate mortgages and zero-rate credit cards without reading the fine print.”