WASHINGTON -- Students taking out government loans to help pay for college should pay the same rock-bottom interest rate that the Federal Reserve charges big banks, Sen. Elizabeth Warren (D-Mass.) proposed Wednesday.
With the interest rate on federal student loans set to double to 6.8% this summer, Warren said it's unfair that big banks can borrow money at 0.75% from the central bank's discount window.
"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," Warren said in introducing her first stand-alone bill since taking office in January.
"That isn't right," she said.
Warren, a longtime consumer advocate, defeated incumbent Republican Scott Brown in November in the nation's most expensive Senate race.
She won with strong backing from liberals, who cheered her embrace of the Occupy Wall Street movement and outspoken criticism of big banks.
Warren's first bill, which likely stands little chance of passage, takes a swipe at Wall Street while advocating for more government help for average Americans.
Warren acknowledged that the Fed's policy, which also includes a near-0% federal funds rate, is designed to help boost the economy by providing cheap credit.
But, she said, "our students are just as important to the economic recovery as our banks."
"Let's face it: Banks get a great deal when they borrow money from the Fed," she said. "In effect, the American taxpayer is investing in those banks. "
"We should make the same kind of investment in our young people who are trying to get an education," Warren said.
The Bank on Students Loan Fairness Act would direct the Fed to make money available to the Education Department for one year at the discount window rate to fund federally subsidized Stafford student loans.