There has been considerable discussion in Washington, D.C., during the past few years about what the government should do about the interest rates on federal student loans. Now, a new suggestion could provide significant savings for those seeking such financing.
While there has been discussion about whether to keep the rates at 3.4 percent, or allow them to double to 6.8 percent, Sen. Elizabeth Warren (D-Mass.) suggested that they should bear the same interest rates to which major financial institutions have access, according to a report from the Huffington Post. In her first bill introduced to Congress, Warren said that federal student loan interest rates should be tied to those for the Federal Reserve Board’s discount window, which is currently 0.75 percent.
“Every single day, this country invests in big banks by lending them money at near-zero rates,” Warren told the site. “We should make the same kind of investment lending money to students, who are trying to get an education.”
Research from the Federal Reserve Bank of New York shows that the average amount of student loan debt carried by people under the age of 25 nationwide has nearly doubled from 2003 to 2012, rising to $20,326. That added debt makes it far more difficult for consumers to take out home or auto loans, which in turn negatively impacts economic growth. Moreover, the problem might be getting worse, because research suggests that the average college graduate in 2011 actually owed more than $26,000 in student loans.
Warren noted that the bill is designed to not only help students out from under the potentially massive and growing debts they rack up in an attempt to get a college education, but also to raise questions about why banks can obtain far lower rates than average Americans, the report said. She is also hoping that students will rally around the legislation and urge their Congressional representatives to support the bill.
[Student Loans: Research and compare options for student loans at Credit.com]
In addition to student loan debts, the average college graduate also leaves school with significant burdens on other types of credit as well. For instance, many may carry thousands of dollars in credit card debt, as well as sometimes-sizable auto loans, and all these may combine to make financial independence more difficult to achieve.