Government Makes $51 Billion A Year Off Student Loan Interest
July 11, 2013 5:06 P.M.
Earlier today, the Washington Post
detailed
the newly crunched figures by the nonpartisan Congressional Budget
Office (CBO), showing the federal government making $51 billion in 2013
alone from student loan interest. It’s hard to fathom such an
astronomical number, but to give it some context: in 2012, ExxonMobil,
the most profitable company in the U.S.,
reported “only” $44.9 billion in net income.
Nationwide, outstanding student loans are at
nearly $1.2 trillion, making them the second-largest source of household debt after home mortgages. Furthermore, the New York Fed
states that it’s also the only kind of consumer debt that has increased since the onset of the financial crisis.
A huge swath of young America is completely hamstrung by their
crippling monthly student loan payments. In May, President Barack Obama
stated that the average new college graduate carries more than $26,000
in student debt, which “…doesn’t just hold back our young graduates. It
holds back our entire middle class.”
An entire year ago, Congress was considering raising the student loan
interest rate, and President Barack Obama went on a college campus
tour, calling on Congress to stop the rate hike. He
warned
that if interest rates doubled, the average student borrower would end
up paying an additional $1,000 for each year of college, over the life
of their loan. His efforts bought borrowers another year at the 3.4%
rate.
However, that year expired on July 1, and due to
Congressional partisan bickering, no agreement was reached. The rate doubled, going from 3.4% to 6.8%.
Republican plans have favored tying student lending to market rates,
which would result in students seeing their interest rate rise every
year, like an adjustable mortgage.
In contrast, Senator Elizabeth Warren (D-Mass.) has been arguing that
the federal government should not be using student loan interest as a
source of profit. In May, she issued a proposal called the Bank On
Student Loan Fairness Act, which would provide a one-year stopgap
solution while Congress works on a long-term solution. Her plan cuts
interest rates from 6.8 percent to 0.75 percent – the same percentage
that Wall Street banks enjoy on their loans.
Even though Republicans blocked her proposal from passing before the
July 1 date, the Democratic Senator is still campaigning for these
drastically reduced interest rates to be approved, giving a speech to
Congress on July 8 and referencing the aforementioned newly established
$51 billion that the government now stands to profit at the current
rates.
More than 1,000 college professors have signed a petition supporting
Senator Warren’s proposal. If you’re a current college student or staff
member, please add your name to the other 600,000+ signatures on
this letter
and show your support for Warren’s godsend of a plan. Also, please
share this and other related articles on social media forums. Let’s
speak out against the Republican plan to prolong the crippling of
America’s young peoples’ financial futures while Wall Street enjoys a
miniscule interest rate!
Watch Elizabeth Warren’s speech about this on the floor on congress BELOW:
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