Senator Elizabeth Warren’s (D – Mass.) first standalone piece of legislation is already gaining broad support despite being little more than two weeks old. The bill would slash the interest rates borrowers pay on federally subsidized Stafford loans.
The “Bank on Students Loan Fairness Act” (S. 897) would allow students who are eligible for federally subsidized Stafford loans to borrow at the same rate that big banks get through the Federal Reserve discount window, currently 0.75 percent.
Interest rates on federal student loans now stand at 3.4 percent. But that rate will double in July to 6.8 percent unless Congress takes action. Federal direct loans carry a fixed interest rate of 6.8 percent. But loans made to students that demonstrate financial need are subsidized and carry a 3.4 percent temporary interest rate which expires July 1, 2013.
Last year, faced with the identical issue, Congress punted the interest rate increase to July 2013.
The bill currently has seven co-sponsors in the Senate. It has been referred to the Committee on Health, Education, Labor and Pensions, of which Warren is a member.
A companion bill (H.R. 1979) was introduced in the U.S. House last week by Massachusetts Democrat John Tierney. That bill has racked up 12 co-sponsors and has been referred to the House Committee on Education and the Workforce.
In addition to the support of her colleagues on Capitol Hill, Warren has noted that many national organizations and institutions of higher learning have endorsed the bill. Universities lending their support include Boston College and Massachusetts Institute of Technology (MIT). National organizations that have formally endorsed the bill include the American Federation of Teachers and the National Organization for Women (NOW).