Helaine Olen writes about Elizabeth Warren’s plan for student loan debt.
Last week, Senator Elizabeth Warren debuted her inaugural legislative effort, a bill intended to stop the cost of federally subsidized student loans from doubling from 3.4% to just under 7% on 1 July. Warren’s solution? A one-year temporary fix that would allow students and their parents to borrow money for higher education at the same rate the Federal Reserve charges banks for short-term loans, which is about 0.75%.
Olen thinks that students need to be bailed out, just as the government bailed out the banks. She argues that Warren’s bill was a stunt, but it was stunt designed to call attention to the real impact that excessive student loan debt has on our economy.
While I am happy to want to see students gettting fairer terms on their student loans, I also want more attention to the roots of the high cost of education. Lower interest rates won’t solve the problem of million dollar college presidents and the lack of support for students about their educational spending.
Apt. 11d 
Cheap money makes people borrow more money. Lower student loan interest rates will increase the cost of college tuition, not decrease it.
LikeLike
This idea has appeared on my facebook page, too and I think it’s terrible. Student loans subsidize universities, not students. And, burdening students with permanent un-dischargeable debt is a bad idea. I think the roots of the high cost of education are the lack of public support for education (and not “inefficiencies” on the part of the universities), but I do not think the solution is to facilitate students lending money to universities (which is what a student loan is).
LikeLike
If Helaine Olen truly doesn’t understand the difference between the 30-year Treasury rate and the discount rate, then nothing she says about finance or economics interests me. If she does understand the difference but is scoring cheap rhetorical points because she thinks her readers are too stupid to know the difference, then nothing she said about any topic would interest me.
I know that Elizabeth Warren is not alone in introducing bills that have no chance of becoming law in order to score political points. That is one reason why I find politics and politicians so revolting.
LikeLike
Hi y81,
I find it hard to believe you read that piece and came to the conclusion I don’t understand the diffference between the 30 yr treasury rate, the discount rate and student loan rates but, hey, sometimes we are not as clear as we think we are. My point, since it clearly needs to be said bluntly, was that Warren’s bill was a stunt, but it was stunt designed to call attention to problems in our economy. Unfortunately politics, in common with most of life, does not reward purists.
Otherwise, Laura, I agree with you. I’ve written about this in the past, but I don’t believe the costs can be controlled till the right of students to unload the debt in bankruptcy court is restored. Let me know if you need me to send you the link.
LikeLike
“I’ve written about this in the past, but I don’t believe the costs can be controlled till the right of students to unload the debt in bankruptcy court is restored.”
That, I totally agree with. It would restore normal, credit and ability to repay rationality to the whole student loan system. Restoration of dischargability would go a long, long way towards controlling college costs.
LikeLike
Someone writes: “Even the federal government pays more to borrow than banks.” That is wrong and stupid. Then that person adduces as evidence a comparison between the 30 year bond rate and the (very short term) discount rate, which is wholly inapposite and demonstrates extreme financial ignorance.
LikeLike
Sorry, Helaine, if I didn’t summarize your article very well. I’ll edit the post. Please send me the link to your article about that discusses how student loans should be subject to bankrupsy laws.
LikeLike
“Restoration of dischargability would go a long, long way towards controlling college costs.”
Amen. It may be necessary to remove federal guarantees as well. It should hurt to make bad loans. There should be a financial incentive to say, “I’m sorry Ms. Munna, we think that it’s not a good risk to lend you $100k in order to study women’s studies and religious studies.”
http://bucks.blogs.nytimes.com/2010/06/01/more-on-cortney-munnas-student-loan-saga/
It’s an old piece, but it’s a classic, and I really like this quote from Munna, who is defending her choices.
“The truth is, I know that I learned more during my time at N.Y.U. than I even begin to realize, and what I really want isn’t to call a “do-over” so much as it is to re-write the rules of the student loan game as it relates to loan underwriting, counseling and the bankruptcy laws. I’m not alone, and I shared my story not to ask for sympathy or assign blame (that was a direction Ron took on his own) but to encourage change.
“Beyond my education itself, I learned how to survive in New York City. To describe my degree as “women’s studies and religious studies” doesn’t really do it justice. I’m an alumna of the Gallatin School of Individualized Study. I created my own interdisciplinary program in collaboration with an adviser. It involved courses from a variety of departments, including religious studies, gender studies, sociology, psychology plus several interdisciplinary and writing seminars. I had to defend my concentration in front of a panel of professors before graduating.”
Oh, honey.
LikeLike