Schumer: ‘The federal government is making profits off the backs of our students’
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As lawmakers and advocacy groups continue to push for $50,000 in student debt cancellation, Senate Majority Leader Chuck Schumer expressed shock over the interest rates that borrowers are being charged by the government.
"The federal government is charging our students and those who have student debt 7% interest," Schumer (D-NY) said during a press conference organized by Student Debt Crisis, an advocacy group. "You know, I'm from Brooklyn, I'd use a curse word before that 7% ... can you believe that?"
He added: "You can get a mortgage for 4 or 5%, you can get a car loan for 4 or 5%. The federal government is making profits off the backs of our students and our graduates and our young people and our middle-aged people, and there were people at 50 who haven't paid off their debt. So this is just a disgrace."
Schumer is most likely referring to historical interest rates on student loans: In the 2006-7 year period, interest rates were 6.8% for subsidized and unsubsidized loans. That rate has decreased over the years and currently stands at 2.75%. The interest rate will increase to 3.73% for 2021-22.
During the press conference, where several borrowers' stories — among 12,000 collected by the organizations — were shared, Schumer also noted that he, alongside Senator Elizabeth Warren had met with the president and were committed to "keeping the pressure on him."
"The president can sign this with a flick of a pen, and the anguish, the anguish of millions and millions of students, former students, their parents, their families could be gone," added Schumer.
Warren, who participated via recorded video, added that timing was critical.
"Right now we are facing a student loan debt time bomb that could throw millions of families over a financial cliff when it explodes," Warren said. "When the pause on student loan payments ends on September 30, people are going to struggle, they're going to miss deadlines, they're going to be delinquent, they're going to owe penalties.
Cancellation: Progressive or regressive?
Debate over the benefits of cancellation has been intensifying across the country.
One recent study by the Roosevelt Institute, a left-leaning think tank based in New York City, came to the conclusion that eliminating debt for millions of borrowers help lower-income debtors far more than rich ones, given the impact of the debt on their relative net worth.
Other academics strongly disagree, stressing that the rich will benefit more from cancellation since they hold higher levels of debt.
Meanwhile, student loan balances increased by $29 billion to $1.58 trillion in the first quarter, according to the New York Fed.
"There is nothing holding back our economy more than student debt," actress Alyssa Milano, who joined the video call, stated. "The change in our culture would be measurable if President Biden were to cancel student debt, and please do not let a government that passed a $1.7 trillion tax cut for the rich tell you that it's too expensive to forgive a similar amount of student debt."
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Aarthi is a reporter for Yahoo Finance. She can be reached at aarthi@yahoofinance.com. Follow her on Twitter @aarthiswami.
Read more:
Student loan forgiveness would actually help low-income borrowers more than rich, study argues
Data highlights the difference in perceived and actual value of a college degree in America
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