Senator Elizabeth Warren, a Massachusetts Democrat who also campaigned on lowering student loan debt, had pushed for tying the student interest rate to what big banks pay to the Federal Reserve and lowering loan rates to 0.75 for one year. But Warren’s bill, her first piece of standalone legislation, never made it to the Senate floor.
“We should not be making money off the backs of our students,” said Warren, referring to the $51 billion in revenue the federal government receives from the student loan program by charging more in interest than it costs to borrow the money. Warren and Tierney recently discussed the issue with students at Northeastern University and encouraged them to express their concerns to public officials in Washington.
“It’s perplexing that we’re in this position,” said Jane Brown, Northeastern’s vice president for enrollment management. “Here we are asking students to pay interest rates that are higher than they’re charging banks.”
Interest rates on federally subsidized Stafford loans used to vary from year to year, depending on how much it cost the federal government to borrow the money. But in 2006, in an effort to win the House majority, Democrats campaigned on promising to cut the interest rate from 6.8 percent to 3.4 percent. Upon winning control of the House, Democrats, with Republican support, gradually lowered the rate until it reached 3.4 percent in 2011.