Thursday, October 10, 2013

Make student loans less interest-ing, says Sen. Elizabeth Warren | EdSource Today

Make student loans less interest-ing, says Sen. Elizabeth Warren | EdSource Today:

Make student loans less interest-ing, says Sen. Elizabeth Warren

October 9th, 2013 | Add a Comment |
By Kathryn Baron

Photo Credit: Mikhail Zinshteyn, National Education Writers Association.

Sen. Elizabeth Warren, D-Mass., spoke last month at the Education Writers Association conference in Boston. Credit: Mikhail Zinshteyn, National Education Writers Association

The federal government should stop making profits from student loans, said Sen. Elizabeth Warren, D-Mass., a leading consumer activist and advocate for student loan reform in Congress. Warren, citing a Congressional Budget Office report, said the government stands to bring in $51 billion in profits this year, a disputed figure that has economists taking sides and has left Warrenopen to criticism.

With student-loan debt nearing $1.2 trillion, “it’s a threat to our students’ futures” and to the economy, Warren told higher education journalists Sept. 28 at a conference at Northeastern University, where she outlined her ideas for making both loans and college more affordable.

Highlights of Sen. Warren’s Speech

Click here for a full transcript.

College affordability:

“More and more low-income and middle-income students just can’t afford to pay the high cost of college. But if those kids want a shot at a stable future, the kind that comes with a college degree, then they can’t afford not to pay, either. So they take on loans to finance their education. That debt is adding up, the student-loan debt, and now approaches $1.2 trillion; and a huge portion of this debt rests on the shoulders of young people who are struggling to keep up with mounting bills at the same time that they’re trying to launch their lives.”

The threat from big student loans:

“Student-loan debt is a threat to our students’ futures, and it’s also a threat to our economy. (I) don’t know if you all saw it, but there’s a recent report from the Consumer Financial Protection Bureau, and it cited student debt as a serious obstacle to home ownership and saving for retirement. The Federal Reserve came out with a study earlier this year that made it clear that education debt is dragging down the family budget and poses a risk to the economic recovery.”

The role of the federal government:

The federal government can’t solve this problem alone, but the federal government can, and should, leverage its dollars to push for improved educational quality and lower tuition costs. In the same way that the federal government helped build the national highway system across the country by partnering with the states, the federal government could partner with the states to help lower the costs for public higher education.

Congress could provide matching funds to the states, where the states agree to provide better funding for public colleges and where the colleges themselves agree to manage the costs better for their students. Sure, there are complications about how different states and different schools can meet their goals, but heck, there were complications in how to build roads through mountains and across deserts, but we managed to solve those problems.”

Dealing with defaults:

“Here’s a simple place to start. Give colleges some skin in the game. When borrowers default on their loans, students and taxpayers feel the effects of that. Colleges should feel some of that heat, too. Schools that run programs that result in high default rates should feel the impact of their failure to prepare their students for economic survival. And if we save money by getting colleges that perform poorly to have to pay something back into the system, we can use that money to help reward the schools that keep college costs low.”

Over the summer, Warren was a tenacious critic of both Republican and Democratic bills aimed at preventing student loan rates from doubling on July 1 from 3.4 percent to 6.8 percent. As EdSource Today has reported, the final legislation passed by Congress ties rates on federally subsidized and unsubsidized Stafford loans and PLUS loans to the 10-year Treasury note, but caps interest rates.

Warren co-sponsored an alternative bill, the Keep Student