As President Barack Obama weighs in on college costs in a first-ever Presidential Tumblr chat Tuesday afternoon, U.S. Senator Elizabeth Warren (D-MA) is trying to push a new bill that supporters argue would change the scale and shape of student loan debt in America.
She joined us Tuesday morning to explain her bill, her choice of interest rates and why the politics of the proposal shouldn’t be in question.
“It’s a pretty simple proposal,” Sen. Warren told us. “It says that for all those people who have outstanding student loan debt — some of it’s at six percent, eight percent and even higher, depending on when you took those loans out — we propose to refinance it down to the current rates for new borrowers, that’s 3.86% for undergraduate loans…and basically do for student loan borrowers what homeowners have all done: refinance down in a current interest rate environment.”
Sen. Warren plans to pay for the loan adjustment process by putting in what she calls a “minimum tax.”
“People who are earning more than a million dollars a year in adjusted income would have to pay a minimum tax of about 30%,” Sen. Warren said.
And the rate adjustment continues to allow student loans to provide a profit source for the Federal Government, Sen. Warren said.
“Even at 3.86%, the United States government will still make a profit on student loans” Sen. Warren. “It will just be much, much smaller than the profit it makes now…I think it is obscene that the United States government is making billions of dollars off the backs of people who just tried to get an education and who weren’t fortunate to be born into families were daddy could write a check for the cost of college but had to borrow money in order to get their education.”
Plus, the Senator noted, as the economic debate on Capitol Hill continues to swirl around different proposals for a larger economic boost, changing the student loan system to benefit loan recipients could dramatically shift larger economic concerns the nation over.
“Student loan debt is dragging down the whole economy,” Sen. Warren said. “Young people can’t buy homes, can’t start small businesses, can’t buy cars, can’t take the economic steps that are not just good for themselves individually but good for the economy overall.”
What do you think of Sen. Warren’s proposal? Is it the right way to tweak the student loan problem in America? Or does more need to be done to help students both afford college and afford to pay off their loans after the fact?