Sen. Warren Spars With Student Lender Sallie Mae Over Loan Rates

June 30, 2013
The Hill 
student loan news

Sen. Elizabeth Warren (D-Mass.) on June 28 sent a letter to the CEO of Sallie Mae, accusing the nation's largest student loan provider of enjoying sizable government benefits while saddling students with steep interest rates. "While Sallie Mae is finding unique ways to profit from government programs, its borrowers are paying interest rates that are far in excess of the low cost of funds supported by the U.S. taxpayers," the legislator wrote. The correspondence was the latest volley between the sender and recipient over the cost of borrowing to fund an education. The exchange began June 24 with Warren questioning the Federal Housing Finance Agency about why Sallie Mae received an $8.5 billion loan of credit from the Federal Home Loan Bank of Des Moines at a rate of 0.23 percent while the student lender charges 25 to 40 times that rate on its own loans. "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 said upon introducing her own student loan bill. Under that proposal, the Fed would subsidize student loans for one year so they fall to the same low rate at which banks borrow from the central bank -- or about 0.75 percent.
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