Senate Dems Push for Student Loan Bailouts

Following closely on the heels of Massachusetts Democratic Sen. Elizabeth Warren’s recent proposal to subsidize student loans through the Federal Reserve, another senator is taking aim at student loan debt with a bill that would give a borrowers a huge break but leave taxpayers scrambling to make up the difference.

New York Democratic Sen. Kirsten Gillibrand introduced a bill this week that requires the Secretary of Education to offer borrowers the chance to refinance their loans at a flat interest rate of 4 percent. This would lower the debt obligations of 9 out of 10 borrowers, according to The Huffington Post.

“At a time when corporations, homeowners and even local governments are refinancing at historically low interest rates and saving millions of dollars, students and families who take out loans to pay for college are getting left behind,” said Gillibrand in a statement. “Ensuring that our graduates are not saddled with unmanageable debt by keeping interest rates low is just common sense.”

Such a break for students and graduates would come at a tremendous cost to taxpayers, however, since the current, higher interest rates generate a massive profit for the government. If rates are left unchanged, the Department of Education will make $51 billion off of student loans in the coming year.

Gillibrand’s legislation would also cut into the profits of Sallie Mae, a lending firm.

The senator has asked the Congressional Budget Office to calculate the cost of the bill to taxpayers before she proposes a way to pay for it.

Interest rates on student loans are currently set by Congressional order. Warren is sponsoring a bill that would set interest rates at .75 percent for one year, paying the difference via a direct subsidy from the Federal Reserve. Her thinking is that college students deserve the same treatment as big banks that are able to borrow money from the Fed at extremely low interest rates.

But college students are much more likely to default on their debt, making them a less trustworthy investment, said Alex Pollock, a fellow at the American Enterprise Institute.

“Going forward we will see in excess of 20 percent lifetime defaults, maybe 30 percent, and that’s even counting that the government rigs the rules so that when you measure defaults they make it very easy to get over the hurdle by giving various forgiveness and exemptions,” he said in an interview with The Daily Caller News Foundation.

A fair market loan rate should be based on careful analysis of risk factors like default and delinquency rates, not politics, he added.

“Until you do that there’s really no point in talking about this rate or that rate in my opinion,” Pollock said.

Forgiving some student loans is gradually becoming a policy goal of President Obama, who enjoyed the support of countless indebted college students in his successful presidential elections. Now these young people are increasingly pushing Democratic politicians to do something about their debts.

read more at The Daily Caller

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  • Sagebrush6

    I think the student loans should have to be paid back ( every penny) but at a low interest rate so that the students can survive after college. They took out the loans, it’s theirs to pay just like buying a car or a house. It just needs to be affordable.

  • More freaking handouts for his cronies. Makes me sick. I had $46K in debt when I graduated and paid every penny back. These takers need to learn personal responsibility and they need to pay the loans back.

  • CQQL33

    If everybody working for the government wants to chip in THIER MONEY to bail them out I would say they should do it………if they want to use my tax money I would say, “Pound Salt…….” …if you get my drift.

  • Sammy97

    More indoctrination. Doesn’t he think they can get the job done in 12 years? IF they choose to go to college, let them either work hard in High School and EARN scholarships and if they need to borrow money, don’t make WE THE PEOPLE have to pay for them too! We already pay for far too many takers, to the point that many of us can barely make ends meet, let alone save anything. I didn’t go to college because I couldn’t afford it, but I got a factory job right out of HS and have made a decent living WITHOUT the taxpayers subsidizing my mortgage or anything else. They have to learn, if you want it, you EARN it, you don’t make other people pay for it. And right now, why bother going to college when there are ZERO jobs to be had?

    Just one more way for Barry Hussein to screw the taxpayer. The Founders allowed ONLY land owners to vote. No skin in the game, no vote. We need to make it so only TAXPAYERS can vote. No skin in the game, no vote. If that had been the case, Barry Hussein would likely have never stepped foot in the White House and we’d have an entirely different country.

  • rosie46

    Here is a unique idea — pay the money back (maybe a lower rate), but pay the loans back. This is not Congress’s, Obama’s or Elizabeth Warren’s money. This is the taxpayers’ money. Some families make decisions to have their students attend community colleges for a couple of years, live at home and go to college as they can, and some students work. These students chose the expensive way, so they should pay it back to the taxpayers who worked to earn it.

  • Timur

    I worked my tail off in college, both academically and physically so that I could pay for my education. So a 4 year degree took me 6 years, but I graduated debt free. Less partying, gaming and supporting liberal causes, get your spoiled butts of the hand out lines and get to work paying for your own education!

  • Robert S Moulds

    I read in patriot update that college students are paying down their debt so what is the harm in a little help such as reasonable payment plan. If only the federal government learn from their example and payed down America’s national debt.

  • junkmailbin

    squeeze every last cent they owe out of them. The lesson is you pay for your play.

  • junkmailbin

    you sign, you pay, of course this applies to republicans and whites in general

  • lets just call a Spade a Spade this action would be nothing more than vote buying….get ’em while they’re young!!!!! totally illegal