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Student Loans Should Have Same Rate As Big Banks

 
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carolina cutie View Drop Down
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    Posted: May 08 2013 at 6:43pm
If you don't like to read, just read the title of the thread to get a sum'ray.LOL

Elizabeth Warren: Give students the same deal as big banks
By: Kate Davidson
May 8, 2013 03:08 PM EDT

Elizabeth Warren is pictured. | AP Photo

The measure would allow some students to borrow at the same rate that banks get. | AP Photo

Sen. Elizabeth Warren introduced her first standalone piece of legislation Wednesday, calling for the government to give student borrowers the same deal it gives big banks when they need a loan.

The measure would allow students who are eligible for federally subsidized Stafford loans to borrow at the same rate that banks get from the Federal Reserve when they need a short-term infusion of cash from the central bank’s discount window.

“If the Federal Reserve can float trillions of dollars to large financial institutions at low interest rates to grow the economy, surely they can float the Department of Education the money to fund our students, keep us competitive, and grow our middle class,” Warren (D-Mass.) said on the floor of the Senate Wednesday.

(Quiz: Do you know Elizabeth Warren?)

Warren is a leading critic of Wall Street banks and the freshman senator’s floor speech Wednesday showed she is looking to highlight government support for the banking industry to make the case for her other policy priorities.

The proposal drew some blowback from the banking industry.

Patrick Sims, a director in policy research at Hamilton Place Strategies, argued a short-term loan from the discount window during a time of crisis is not at all comparable to a long-term student loan.

While some people have called for higher rates or penalty rates for banks that access the discount window, the point of the funding is to prevent a liquidity crisis and is not how banks fund themselves over time, Sims said.

“Using something completely unrelated and feeding into populist animosity toward large banks to increase the sympathy for the student loan body or students in general, it just kind of sounds like a weird way to legislate,” Sims said. “I don’t know if it necessarily helps our student loan situation in the United States today.”

Under Warren’s proposal, the Fed would make funds available to the Education Department for one year to make loans to students at the same rate offered to large banks.

(Also on POLITICO: Warren: Trade talks may weaken regs)

The bill would give students relief from high interest rates while giving Congress time to find a long-term solution to the increasing costs of Stafford loans, Warren said.

She noted that large banks can currently borrow from the Fed’s discount window at a rate of about 0.75 percent, but if the rate for new Stafford loans increases — as it is set to do on July 1 — a student borrower seeking a loan this summer will pay almost 7 percent.

“In other words, the federal government is going to charge students interest rates that are nine times higher than the rates for the biggest banks — the same banks that destroyed millions of jobs and nearly broke this economy,” she said. “That isn’t right.”

This is only the second time Warren has delivered a Senate floor speech. The first was just a few weeks ago, when she spoke about the bombings at the Boston Marathon.

The CFPB, Warren’s brainchild, is scheduled to hold a field hearing on student loans later today.

The bureau said last year that student loan debt had topped $1 trillion, and it has warned about the ripple effects on the economy if those borrowers are unable to buy a home or save for retirement.

Warren also noted the “serious risk to the recovery” that student debt poses, and said students are just as important to economic growth as big banks.

(Also on POLITICO: Elizabeth Warren plans book on middle class)

Warren dismissed the idea that the bill would be too expensive. The federal government earns 36 cents in profit on every dollar it lends to students, she said, which will bring in a total of $34 billion next year.

“We shouldn’t be profiting from our students who are drowning in debt while we’re giving great deals to big banks,” she said.

This article first appeared on POLITICO Pro at 3:03 p.m. on May 8, 2013.

http://www.politico.com/story/2013/05/elizabeth-warren-student-loans-91079.html?hp=t3_3

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CamiK View Drop Down
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Post Options Post Options   Thanks (3) Thanks(3)   Quote CamiK Quote  Post ReplyReply Direct Link To This Post Posted: May 08 2013 at 6:54pm
This my chick!!!  But they need to work on students not having to pay that sh*t back at all!!
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nekamarie83 View Drop Down
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Post Options Post Options   Thanks (7) Thanks(7)   Quote nekamarie83 Quote  Post ReplyReply Direct Link To This Post Posted: May 08 2013 at 7:11pm
Originally posted by CamiK CamiK wrote:

This my chick!!!  But they need to work on students not having to pay that sh*t back at all!!
Or working on making education more affordable or "middle class" wages higher to not need (so much of) the loans in the first place.
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Post Options Post Options   Thanks (0) Thanks(0)   Quote carolina cutie Quote  Post ReplyReply Direct Link To This Post Posted: May 08 2013 at 9:50pm
^Stop being reasonable.


http://www.huffingtonpost.com/2013/05/08/cfpb-student-debt-relief_n_3241107.html

CFPB Pushes Student Debt Relief

Posted:   |  Updated: 05/08/2013 9:02 pm EDT

Households struggling under the weight of student debt burdens moved one step closer to a lifeline Wednesday, after the federal consumer regulator suggested that Washington policymakers consider government-initiated loan workout and refinancing schemes for distressed borrowers.

The policy options, culled from more than 28,000 comments on a Consumer Financial Protection Bureau consultation regarding student loan affordability, may guide the Obama administration's approach to reducing student debt burdens, which have outpaced inflation and earnings growth and are untethered to broader borrowing rates.

“We are concerned that unmanageable student loan debt may be harmful to recovering consumer markets and may be dragging down borrowers’ lives,” said Richard Cordray, CFPB director, who likened the current student loan market to the subprime market for home loans that led to the financial crisis. “We learned a hard lesson in the wake of the mortgage meltdown. We cannot just sit by and watch this happen to people again."

The report comes on the heels of an increasing number of warnings from policymakers, ranging from the Treasury Department to the Federal Reserve Bank of New York, concerned that high student debt burdens are dampening consumption and borrowing and may pose a risk to financial stability or economic growth. Of consumer debt, only home mortgages exceed the $1.1 trillion in outstanding student loans, according to CFPB and Federal Reserve data.

The CFPB report, too, warned that high student debt levels are preventing a generation of borrowers from saving enough for retirement, starting businesses or buying a home.

“There needs to be a significant attention if you believe that there's a broader impact on the economy and society of borrowers who are dealing with this debt today,” said Rohit Chopra, CFPB student loan ombudsman, describing what he called the “student debt domino effect on the broader economy."

The potential programs outlined in the CFPB report could help borrowers like Katie McKenna of Seattle. A 32-year-old nutritionist, McKenna has $138,000 in outstanding student loans, with most of that debt carrying an interest rate exceeding 8 percent.Shocked

"Preparing for retirement is not really on my mind. It's hard to conceptually put money away when I have so much debt," McKenna said. "I'm not doing savings, I'm not doing retirement; I'm curious about buying a house, but I'm not sure if that's a good idea.”

“Personally I don't plan to have children," she added, "but my dad told me the other day, jokingly, 'You can't have kids, you have too much debt.'"

Millions of student borrowers are paying record relative interest rates on their government loans, according to a Huffington Post review, frustrating efforts by policymakers to reduce borrowing costs for households.

The Financial Stability Oversight Council -- the collection of regulators charged with protecting the financial system -- recently cautioned Congress about the growth of education borrowings. Some members of the Federal Reserve's interest-rate setting panel, the Federal Open Market Committee, mentioned "the high level of student debt" as a risk to aggregate household spending over the next three years, posing a threat to economic growth, according to minutes from its March meeting.

Lawmakers are weighing legislation that could help borrowers reduce their debt burdens, either through bankruptcy, government-sponsored modifications or refinancing schemes. On Wednesday, Sen. Elizabeth Warren (D-Mass.) proposed legislation that would set interest rates on some student loans to the same rates enjoyed by banks that borrow from the Fed. Her bill would reduce rates from their current 3.4 percent to 0.75 percent for loans that would be funded by the Fed.

The CFPB report pointed to past government programs that benefited lenders, suggesting it may be time for an initiative that focuses instead on helping student borrowers. For example, a 2008 law called the Ensuring Continued Access to Student Loans Act (Ecasla) led to “some cases of extraordinary gains” when companies that owned student loans later sold them to the Department of Education.

Sallie Mae, the largest student lender and loan servicer, recorded gains of $284 million in the 2009 fiscal year and $321 million in the 2010 fiscal year off such sales, the CFPB said, citing Sallie Mae securities filings.

The company defended its actions in a statement, saying, “Given the dire circumstances the markets were facing at the time, this intervention afforded 6 million students to access higher education at an extremely low cost to the Department of Education."

The CFPB report also highlighted past government interventions in the student debt marketplace, such as programs by the Education Department and the Fed, as a basis for future action, and detailed a potential loan-modification scheme similar to an existing home-loan initiative run by the Treasury Department.

In addition, the consumer agency suggested a refinancing program that would rely on the Federal Financing Bank, a government corporation that borrows from the Treasury and lends to agencies and borrowers with government guarantees. Rural utility concerns are among the bank’s biggest beneficiaries, federal data show.

Cordray said a refinancing scheme “would make sense” because students who applied for loans were much riskier borrowers then compared to when they graduate and secure employment. “Given today’s historically low interest rates, there is a tremendous opportunity for lenders to take advantage of an underserved market,” he said.

Cordray also supported a loan modification program for borrowers with private student loans that tied monthly payments to “reasonable” debt-to-income ratios.


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danieb23 View Drop Down
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Post Options Post Options   Thanks (0) Thanks(0)   Quote danieb23 Quote  Post ReplyReply Direct Link To This Post Posted: May 08 2013 at 10:09pm
Added her to the list of women I love!
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Post Options Post Options   Thanks (0) Thanks(0)   Quote OoDles O Quote  Post ReplyReply Direct Link To This Post Posted: May 08 2013 at 10:16pm
I like Warren She genuinely seems to care about the average consumer.
But she seems to be in an uphill battle all by herself. Isn't she 1/32 Cherokee ?

I wish my man Spitzer never effed around with those prostitues.
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Post Options Post Options   Thanks (0) Thanks(0)   Quote CamiK Quote  Post ReplyReply Direct Link To This Post Posted: May 08 2013 at 11:20pm
How about I just got my student loan payment plan in the mail!!  Lmao...I aint gon nevaaaa pay that off...
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Post Options Post Options   Thanks (1) Thanks(1)   Quote carolina cutie Quote  Post ReplyReply Direct Link To This Post Posted: May 08 2013 at 11:34pm
Cami, I'm on deferment until I finish school but I have a feeling many people with loans have no intent on paying that ish back.

I almost faint when friends tell me of $100k+ loan bills. My mind can't handle 6 digits of loan debt.Cry
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Post Options Post Options   Thanks (0) Thanks(0)   Quote CamiK Quote  Post ReplyReply Direct Link To This Post Posted: May 08 2013 at 11:44pm
Lol CC, Im gonna set up a payment plan based on my income, plus my parents help...but after I complete med school I will most def have six figures worth of debt...my mom is trying to convince my dad to use some of his pension to pay off my debt...he dont hear her though...all I can do is laugh cause its so damn sadLOL...we are all doomed...
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Post Options Post Options   Thanks (0) Thanks(0)   Quote carolina cutie Quote  Post ReplyReply Direct Link To This Post Posted: May 08 2013 at 11:48pm
^Girl, you'll have the income to pay off your debt! Don't be like Becky from the article paying $100k for a BS degree.Cry
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