News about student loans is becoming more common recently, particularly the revelation that just like last year unless Congress does nothing, the interest rate on federal direct student loans will double from 3.4 percent to 6.8 percent for undergraduate students. Seeing the unfairness of high student loan interest rates, Massachusetts Senator Elizabeth Warren has just introduced legislation that would significantly reduce the interest rates student debtors would pay.
An article in the Los Angeles Times reported that the senator introduced the Bank on Student Loans Fairness Act. Large banks can borrow money from the Federal Reserve at 0.75 percent to ensure that they’re sufficiently capitalized to serve depositors who wish to withdraw money from them. Senator Warren introduced the bill because she doesn’t believe it’s fair that bailed-out banks that wrecked the economy shouldn’t be subsidized more than students. It is the first standalone bill she has introduced as a legislator.
Warren commented, “In other words, the federal government’s going to charge interest rates nine times higher than the rates they charge the biggest banks — the same banks that destroyed millions of jobs and nearly broke the economy. That isn’t right.”
Although the Fed’s unusually low “discount rate,” as it’s called, is designed to ensure creditors have access to cheap capital that they can lend out at low interest rates and boost the economy, Warren argues that the investments in students are just as important as those in the rest of the economy.
Although very low interest rates for student loans would be greatly beneficial to current students the act probably won’t prevent people from taking on excessive student loan debt. Some federal loan programs, such as the Parent PLUS and Grad PLUS loan programs, carry a 7.9 percent interest rate and allow parents and students to take out as much money as the remaining cost of attendance requires and even living expenses too. The act would also do little good for current debtors whose balances are too high or need to refinance their loans.
If you have significant student loan debts, talking to a Las Vegas bankruptcy lawyer can help you learn what your options are, whether you’re eligible for income-contingent repayment plans, forbearance options, or bankruptcy.
For more questions about bankruptcy in Las Vegas, please feel free to contact an experienced Haines & Krieger Las Vegas bankruptcy attorney for a free initial consultation. Call us at 1-702-880-5554 to set up your free consultation.