It should come as no surprise that Sen. Elizabeth Warren’s first bill deals with consumer finance.
This time, the Massachusetts Democrat is pushing legislation to prevent a scheduled jump in the interest rate on federal student loans that’s due to take effect on July 1. Without action, the interest rate would double from 3.4 percent to 6.8 percent.
“The student debt problem in this country is a quiet, but growing problem. Today’s graduates carry more than $1 trillion in debt, more than all the outstanding credit card debt in the whole country,” Warren said Wednesday morning on the Senate floor.
Warren said her legislation would “give students the same deal we give to big banks,” by directing the Federal Reserve to provide money to the Education Department to loan out money for federal student loans at the same rate as banks can borrow money through the Federal Reserve’s discount window.
The House and Senate reached an agreement to extend the lower rates in advance of the election-year August recess, but now the date is approaching to pay the piper. House Majority Leader Eric Cantor, R-Va., said in a May 3 memo that Rep. John Kline, R-Minn., would move forward with a market-based alternative in that chamber.
“Chairman Kline and the Education and Workforce Committee will produce a bill to replace the legislatively fixed interest rate with an interest rate tied to market rates for federal borrowing. In the near-term this is expected to provide an interest rate lower than the 6.8% fixed in law and over the long-term provide savings for taxpayers,” Cantor wrote. “This bill takes congress and politics out of setting interest rates and provides a long-term fix to the interest rate cliffs initiated in 2007.”
Senate Republicans have a similar proposal.
Before arriving in the Senate, Warren spearheaded the development of the Consumer Financial Protection Bureau, a new regulatory body that’s been panned by many in the banking industry. In addition, Senate Republicans have opposed confirming anyone to helm to the bureau until organizational changes are made.
That’s led to a standoff over President Barack Obama’s recess appointment of Richard Cordray as CFPB director.