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Most people with student loan debt are struggling with higher interest rates than mortgages and many other loans carry. And in most cases, refinancing isn't an option for student loan debt. Sen. Kirsten Gillibrand is seeking to change that, with a bill that would allow government-backed student loans to be lowered to a fixed rate of 4 percent, reducing the rates on an estimated 90 percent of federal student loans:
The Center for American Progress, a left-leaning policy and advocacy group, estimates that Gillibrand’s proposal in its first year would save borrowers about $14.5 billion off their student loan payments, boosting U.S. economic activity by $21.7 billion.
Gillibrand isn't the only Democrat looking for ways to ease the $1 trillion student debt burden; Sen. Elizabeth Warren has proposed giving students the same interest rates as big banks, among several other proposals. These proposals inevitably meet with "how are we going to pay for it?" objections from Republicans, and reporting on them goes along with that, presenting lowered student loan interest rates as a cost to taxpayers. That's because right now, student loan interest—paid by working- and middle-class people, people who couldn't afford to just write a check for the full cost of college tuition—is a significant revenue source:
Washington’s increased interest in student loan issues comes as the Education Department is forecast to generate a $51 billion profit this year from lending to college students and their families, a figure higher than the 2012 earnings of Exxon Mobil, the nation’s most profitable company, and roughly equal to the combined net income of the four largest U.S. banks by assets.
Reducing the interest rates on government-backed student loans is effectively a tax cut, in other words, but since it's a tax cut on the wrong kind of people (non-wealthy, non-corporate people), it's a tax cut Republicans don't like. So efforts to lower the student loan interest rate are always met by cries of "but how will we pay for it," as if tens of millions of recent graduates and their families weren't already paying for it. With interest rates again slated to double to 6.8 percent on July 1, something needs to be done to help students and recent graduates build their lives as adults without massive debts hanging over them, constraining the choices they can make about jobs, about taking risks, about starting families.

Originally posted to Daily Kos Labor on Mon May 20, 2013 at 09:06 AM PDT.

Also republished by Daily Kos.

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Comment Preferences

  •  The whole purpose of the government takeover (19+ / 0-)

    of the loan program was to relieve the student borrowers from onerous loan origination fees and interest rates.   That was years ago.  It never happened. The Feds pocketed the savings.  It's about time someone did something about this.  

    Also, there is something y seriously wrong with a government that can lend billions to Wall Street at 0% so that it can buy government bonds that pay interest but still feels the need to charge students 4%.   That's seriously effed up.  

    The patellar reflex is a deep tendon reflex which allows one to keep one's balance with little effort or conscious thought.

    by SpamNunn on Mon May 20, 2013 at 09:20:34 AM PDT

  •  if we call the loan interest a tax.... (4+ / 0-)

    ..will Republicans INSIST we reduce the tax/interest to 0%  ??

    if " Education Department is forecast to generate a $51 billion profit this year from lending to college students and their families" then the gubmint is making money the patriot shouldn't we eliminate the student tax?

    oh education tax helps promote ignorance

    PLEASE donate to a global children's PEACE project: Chalk 4 Peace

    by RumsfeldResign on Mon May 20, 2013 at 09:25:14 AM PDT

  •  I thought the plan was... (1+ / 0-)
    Recommended by:
    Little Flower

    to have the government take over the student loan business and use the interest and fees to help expand the number of loans that could be made.

    You loan out $100, charge 5% and at the end of the loan have $127 to loan out again.  

    If the interest from student loans was rolled over into the program, it could 1) become self funding and not a tax burden, and 2) could allow for more loans to more people.

    As a tax payer 1) sounds great.  As a decent person, 2) sounds even better.  Both are possible.

    -full discloser, I did not fund my education with debt because I did not want to end up a serf chained to my debt.  In the end I've ended up chained to student loan debt from my spouse.  The original plan was to pay off the loan in 25 years, we have taken efforts to lower that to 17 years, and might get it down to 15.  Just make extra payments every year, that effectively lowers your interest.

    Stupid question hour starts now and ends in five minutes.

    by DrillSgtK on Mon May 20, 2013 at 09:42:37 AM PDT

    •  it doesn't make sense for the gov't (0+ / 0-)

      Because the government doesn't need to capitalize itself.

      Instead, just fully fund the program, and offer the interest at cost.

      As the MMT people keep pointing out, there's no need to think of the government as working like a business, rationing investment to saved capital.

      The whole point of government investing is to increase human and productive capital for the country as a whole. If it can do that for free (which the $51 billion says it can), it should do so.

      It's appalling that the government is making $51 billion off student loans. Appalling.

      •  It made $51 billion... (0+ / 0-)

        but how much did it loan out?  where did that money come from?

        Sadly under our current tax code, the money has to come from the tax payer or from promises to raise taxes later (bonds).  

        So to loan out $140 billion the Fed Gov has to come up with $140 billion.  Under current tax code, that means all tax payers (which we know are not the rich) have less money in their take home paychecks to come up with this money to loan out to college students.

        If the $51 billion was rolled over into the fund, then instead of having to come up with $140 billion this year, they only need to come up with $89 billion and they still can loan out $140 billion.  In theory this means the tax payer gets to keep more of their pay check.  Or they could add the money to the program, still come up with $140 billion plus the $51 billion and loan out $191 billion to more people.

        They could loan out $140 billion at 0%, and the taxpayers could just eat that cost. But in that case, you might as well just turn all student loans issued by the Fed Gov into Grants.  That would end the problem of student loan debt by turning the program into a grant program.  You don't have to pay back grants.

        Stupid question hour starts now and ends in five minutes.

        by DrillSgtK on Mon May 20, 2013 at 12:34:47 PM PDT

        [ Parent ]

        •  This is not true. (0+ / 0-)
          Sadly under our current tax code, the money has to come from the tax payer or from promises to raise taxes later (bonds).
          Gov't does not have to rely on tax payers to fund gov't spending.  Time to read up on how federal economy works.

          "In this world of sin and sorrow there is always something to be thankful for; as for me, I rejoice that I am not a Republican." - H. L. Mencken

          by SueDe on Mon May 20, 2013 at 03:16:19 PM PDT

          [ Parent ]

          •  If not taxes then how? (0+ / 0-)

            The government has to get money from someplace.  I see three sources: 1) taxes (on people directly like income/sales/fees/etc and indirectly through business taxes) 2) borrowing (saying "we will tax people later to pay you back") and 3) printing (inflation, making the value of the money less, a tax on money directly.)

            if the third method, the taxpayer will see the amount of stuff they can buy with their money get smaller, so everything will cost more and out side of a few people, their pay check won't keep up with the increase.  Just look at the median pay of a worker adjusted for inflation, we have lost ground because what we get paid is not being increased as fast as inflation has been growing.  

            Inflation goes up every month, most people get an annual cost of living adjustment after the fact.

            If the Fed Gov could print money to pay for everything, then they would not need to tax anyone.  They don't just run the printing press because that would destroy the value of the dollar.

            Stupid question hour starts now and ends in five minutes.

            by DrillSgtK on Mon May 20, 2013 at 05:00:02 PM PDT

            [ Parent ]

  •  I've been paying (3+ / 0-)
    Recommended by:
    714day, Joe Bob, cybersaur

    over 7% for 15 years with at least another 8 years to go which time I will be 65.  Any help here for me so I can save something to retire on?  My payments have been as much as 50% of my take home pay, now finally down to about 32% ...... but so what?

    "Life is a tragedy for those who feel, a comedy for those who think" - Jean de la Bruyere

    by Tinuviel on Mon May 20, 2013 at 09:49:26 AM PDT

  •  I like it (4+ / 0-)
    Recommended by:
    SueDe, 714day, Helpless, cybersaur

    but I like Sen. Warren's better...

  •  This should be an easy bill to pass (0+ / 0-)

    Republicans can't afford to allienate more young voters.  They should be reminded of such, and this bill should be an easy pass.  Nothing else is acceptable.

    The symbol for the Republican party shouldn't be an elephant -- it should be a unicorn.

    by Deadicated Marxist on Mon May 20, 2013 at 09:53:21 AM PDT

  •  Would this apply for Direct PLUS loans... (3+ / 0-)
    Recommended by:
    714day, cybersaur, HM2Viking

    ...that parents take out to finance their kid's education?

    I have some of those loans and they are at 7.9% which is a crime given the low interest rates available for mortgage and auto loans.

    •  If it doesn't, couldn't you just get your kids (0+ / 0-)

      to take out their own low-cost loans to finance their own education and use that money to pay back the high interest loans?

      "In this world of sin and sorrow there is always something to be thankful for; as for me, I rejoice that I am not a Republican." - H. L. Mencken

      by SueDe on Mon May 20, 2013 at 10:06:05 AM PDT

      [ Parent ]

    •  student loans (1+ / 0-)
      Recommended by:

      I have PLUS loans too and the interest being charged is nothing short of criminal. Paying for college is going to keep me from buying things like a new car and a house! Multiply that by millions just like us and you have yourself a recipe for economic disaster (again).

      +++ The law is a weapon used to bludgeon us peasants into submission. It is not to be applied to the monied elite.

      by cybersaur on Mon May 20, 2013 at 02:51:24 PM PDT

      [ Parent ]

  •  Let the Republicans alienate another Group! (1+ / 0-)
    Recommended by:
    Eric Nelson

    The Democratic Party should be about investing in the future of America, and what better way to invest in the future than to educate our young people.  Only a Republican would want to profit from education, hence charter schools and the move to privatize education.  Only a Republican could suggest letting the kids clean the toilets (Ginginch) with a straight face in a presidential primary.

    There is so much wrong with today's Republican Party, and all of it is reflected by the problems that they create with our society.

    "Stupidity got us into this mess, then why can't it get us out?" Will Rogers offering advice to the Republican Party.

    by NM Ray on Mon May 20, 2013 at 09:57:35 AM PDT

    •  The big problem with allowing Republicans (1+ / 0-)
      Recommended by:

      to get their way long enough to be hoist on their own petard is that, in the meantime, a lot of people are subject to needless suffering.

      "In this world of sin and sorrow there is always something to be thankful for; as for me, I rejoice that I am not a Republican." - H. L. Mencken

      by SueDe on Mon May 20, 2013 at 10:07:14 AM PDT

      [ Parent ]

  •  I like the bill, but it's like treating the (3+ / 0-)
    Recommended by:
    sceptical observer, bryduck, Helpless

    symptoms and not the problem. The real underlying problem is the cost of higher education.

    The average tuition and fees at a public, four-year university rose to $8,655 in 2012-13, not counting the costs of room and board, according to the College Board. That’s 250 percent more than it would have cost in 1982, when a year of college would have set the average student back just $2,423 in today’s dollars.

    If we could bring college prices back down to reasonable levels the interest rate problem would go away.

    •  Republicans say that making low-interest loans (4+ / 0-)

      available to more students is the main reason for college tuitions rising at the rate they have been.  That may be partially true for private colleges, but state colleges are suffering from their state's inability to finance state universities at pre-recession levels.

      "In this world of sin and sorrow there is always something to be thankful for; as for me, I rejoice that I am not a Republican." - H. L. Mencken

      by SueDe on Mon May 20, 2013 at 10:10:24 AM PDT

      [ Parent ]

  •  This would be a great thing (1+ / 0-)
    Recommended by:

    I'm a non profit lawyer and I'm paying $750 month on my loans which makes it really tough to be a non profit lawyer.  A lot of my friends in non profits move out of it b/c of money issues and that leaves the people we cover - mostly poor, mostly minorities, mostly ignorant of their rights with young lawyers who don't know much in their area.  By the time they've become "good" lawyers, they move on.  Reducing interest would help not just the lawyers like me but also help the people they serve.  

  •  How to "pay" for it. (1+ / 0-)
    Recommended by:
    Joe Bob

    The same way the Republicans "paid" for the 2001 and 2003 income tax cuts: "Pay" for it in the "out years."

    Consider this: Since student loan interest is now deductible, the reduced interest rate will result in lower interest deductions, therefore, WALLA!, higher taxable income and therefore more tax revenue without raising taxes !!!

    There ya go; a Win for everyone!

    Notice: This Comment © 2013 ROGNM

    by ROGNM on Mon May 20, 2013 at 10:02:47 AM PDT

  •  We need to also pressure the White House (2+ / 0-)
    Recommended by:
    Eric Nelson, Helpless

    I started a petition at asking for a permanenet lowering of interest rates. Its generated a whopping 7 signatures over the past 2 weeks.

    If we can't show support from the base we won't get action from the White House to get either Sen Warrens or Gillibrands bills attached to the federal budget.

    Both proposals are great but they will be Kabuki politics if we fail to apply some pressure.

    Both my wife and I are eligible for public service loan forgiveness but as a married couple we would be paying fully a third of our income towards the debt for 10 years.

    The real travesty is the parent plus loan program. Effectively 9% interest. This was raised in 2006 by the GOP from 6.78%. The debt burden on families is staggering with the usurious interest rates of the GOP.

  •  If it will help me and millions like me (4+ / 0-)
    Recommended by:
    Eric Nelson, hyperstation, Joe Bob, SueDe

    who have been paying but due to some economic hard times was in default for 2 years.. but now am now paying regularly.. then GET IT DONE.  I haven't seen a reduction in the principal in years.. seems to get bigger not smaller. AND they have taken my tax refund for the past 3 years.. I pay 7.8% on my Student Loan and 5.75% on my mortgage.. but because of the 'default' my credit rating SUCKS.. would like to refinance the Student Loan.. pay what I pay now.. and just have it done before I retire in 15 - 20 years. $48K.. remains the same amount since I graduated in 1999. Sad isn't it.

    Why do Republicans Hate Americans?

    by Caniac41 on Mon May 20, 2013 at 10:08:26 AM PDT

  •  Our discourse is so fucking narrow (3+ / 0-)
    Recommended by:
    Joe Bob, Chitownliberal7, Helpless

    This is the progressive position? How about free education for all and loan forgiveness for graduates? We are going to fall behind the rest of the industrialized world if we stop educating our kids, and keep the ones we do educate in indentured servitude for decades after graduation.

    There's a difference between a responsible gun owner and one that's been lucky so far.

    by BeerNotWar on Mon May 20, 2013 at 10:14:24 AM PDT

  •  well, anyone can introduce a bill calling for any (2+ / 0-)
    Recommended by:
    Kickemout, Helpless

    wonderfully wonderful thing of wonderness.

    Unless it passes, though, it doesn't mean jackshit.  (shrug)

  •  MAYBE THIS IS TOO SIMPLE, BUT... (1+ / 0-)
    Recommended by:
    Eric Nelson

    Reality is a good thing to know about, as long as you keep it separate from the Opera we live in

    by greatferm on Mon May 20, 2013 at 10:38:34 AM PDT

  •  Not only do Republicans want to screw students, (0+ / 0-)

    so does Obama by letting student loan rates conform to market rates.  But then, I guess one might say that on this front Obama is a Republican.

    The trouble with the world is that the stupid are cocksure and the intelligent are full of doubt. Bertrand Russell

    by accumbens on Mon May 20, 2013 at 11:08:23 AM PDT

  •  throw me a frickin' bone here. (2+ / 0-)
    Recommended by:
    Helpless, cybersaur

    Gillibrand’s bill for 4% would be awesome. Warren’s bill for 0.75% would be incredible. I would be frickin’ thrilled if they just raised the cap on the student loan interest deduction – which is currently $2,500.

    Outside of a dog, a book is man's best friend. Inside of a dog, it's too dark to read. - Groucho Marx

    by Joe Bob on Mon May 20, 2013 at 01:13:53 PM PDT

  •  Better idea (1+ / 0-)
    Recommended by:

    Use the $50 billion or so that the US government was able to retain in student loan interest to fund the Department of Education (budget of approximately $70 billion).

    •  Funding education... (0+ / 0-)

      That is a radical idea, Couchsachraga. You want us to be competitive with all of those other countries who are investing in educating their citizens or something?

      Seriously, thanks for your comment.

      Welcome from the DK Partners & Mentors Team. If you have any questions about how to participate here, you can learn more at the Knowledge Base or from the New Diarists Resources Diaries. Diaries labeled "Open Thread" are also great places to ask. We look forward to your contributions.
      Hope to see you around the site.

      "Compassion is not weakness, and concern for the unfortunate is not socialism." Hubert H. Humphrey

      by nomandates on Tue May 21, 2013 at 07:31:11 AM PDT

      [ Parent ]

  •  It's a tax cut damn it! (0+ / 0-)

    Get Grover on the line!

    If CEO's and their brethren have employment contracts, why do they insist that their employees don't need one?

    by JDPITALIA on Thu May 23, 2013 at 05:33:21 PM PDT

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