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Elizabeth Warren: Students shouldn't pay a higher rate than banks

Sen. Elizabeth Warren wants to help college students drowning in debt by putting them in the same boat as the big banks.

Sen. Elizabeth Warren wants to help college students drowning in debt by putting them in the same boat as the big banks.

"We do this for the banks because we believe that this is going to help the economy, right, help us on shaky recovery. Same thing is true for our students," Warren said in an exclusive interview on The Last Word with Lawrence O’Donnell on Wednesday. "The big banks have got an army of lobbyists out there, they’ve got an army of lawyers to fight for them. Our students have just their voices and they call on us to do the right thing and that’s what we need to do."

The new Democratic senator from Massachusetts introduced her first bill Wednesday, the Bank on Students Loan Fairness Act, offering students temporary relief from the burden of high interest rates on 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 during a speech on the Senate floor, her second one so far.

Under the plan--and for only one year--eligible students would be able to borrow at the same interest rates on their federally subsidized Stafford loans as large banking institutions do with the Federal Reserve.

Big banks can currently lock down a rate of 0.75 percent, Warren made sure to note. College kids, however, pay much more than that. And it’s only going to get worse for them as of July 1, when the rate is scheduled to double from 3.4 percent to 6.8 percent.

“In other words, the federal government is going to charge students interest rates that are nine times higher than the rates for the biggest banks—the same banks that destroyed millions of jobs and nearly broke this economy,” she said. “That isn’t right.”

Data from the New York Federal Reserve Bank shows the average borrower owes an average of $27,000 in loans–a number that continued to spike through the financial crisis, Reuters reported.

Student loan debt in America has skyrocketed to more than $1 trillion, according to the U.S. Consumer Financial Protection Bureau. On Wednesday, the watchdog group warned the long-term economic recovery may be in jeopardy if nothing is done to offer these borrowers some extra assistance; deep debt may hinder them from investing in homes or cars, starting businesses or saving for retirement.