As a first-term senator from Massachusetts, Elizabeth Warren is advancing her fight for middle-class families with a legislative agenda focused on college affordability and student debt. "Rising student-loan debt is an economic emergency," she says. "Forty million people are dealing with $1.2 trillion in outstanding student debt. It's stopping young people from buying homes, from buying cars and from starting small businesses. We need to take action."
Warren's bills range from pie-in-the-sky progressive – she called for college loans to be issued at the same, nearly free, interest rates that Wall Street banks receive from the Fed – to soberly bipartisan. Her proposal to refinance outstanding student-loan debt at less than four percent interest (financed by a new minimum tax on America's top earners) nearly cleared the Senate in June, and will return to the Senate floor for a new vote this fall. "This country invests in tax loopholes for billionaires," she says. "And forces college students to pay for them through higher interest rates on their loans. That makes no sense at all."
College affordability is not a new problem. Tuition costs are up 500 percent since 1985. Senate Minority Leader Mitch McConnell says the solution is that "not everybody needs to go to Yale." That sounds cynical. But is there some pragmatism there? Is it time to admit that a traditional college education has become a luxury good?
Mitch McConnell's idea that people should dream a little smaller is deeply flawed. And let me add: The problem is not limited to private universities. States used to pick up about three out of every four dollars it cost to educate someone at a public university. Now it's about one in four. In America today, a young person needs more education after high school just to have a chance to make it in the middle class. Not a guarantee, just a chance to make it.
What can Congress do about it, on the front end, to rein in tuition?
One way is to force schools to have some skin in the game. I've co-sponsored a bill with Sen. Jack Reed [D-R.I.] that requires colleges with high student-loan defaults to pay back some of the federal student aid they use.
The major thrust of your work hasn't been in trying to lower tuitions, but in making college cheaper to finance. Why is that the right approach?
Just the little slice of loans that were issued between 2007 and 2012 are projected to produce $66 billion in profits to the federal government. Think about that. The role of government has to be helping young people, instead of taxing them for making the effort. I would like [to set student loans] at the same rate that the government currently charges the financial institutions. I tried that last year [laughs].
Your latest proposal is to let people with outstanding student debt refinance loans at the same rate currently being offered to students.
Homeowners refinance their loans when interest rates go down. Businesses refinance their loans. But right now, there's no way for students to be able to do that. I've proposed that we reduce the interest rate on the outstanding loan debt to the same rate Republicans and Democrats came together last year to set on new loans [3.86 percent]. For millions of borrowers, that would cut interest rates in half or more. Unfortunately, the federal government can't just reduce the interest rate. It has already built those expected profits into the budget. So we propose stitching up tax loopholes that are available only to millionaires and billionaires, and requiring them to pay taxes at the same rate most American families pay. That would more than pay for the cost of reducing the interest rate on student loans.
What's the status of that bill?
Every single Democrat supported it. Both Independents supported the bill. And even three Republicans voted to move it forward. But the rest of the Republicans filibustered.
We will be voting on it again in September. As a country, we can either invest in tax loopholes for billionaires or lower-cost student loans for young people who are trying to build a future. Billionaires or students: It's a pretty stark choice.