The Instigator
TomJoad
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The Contender
Crevaux
Con (against)
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Senators warrens first bill

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Voting Style: Open Point System: 7 Point
Started: 5/14/2013 Category: Politics
Updated: 3 years ago Status: Post Voting Period
Viewed: 517 times Debate No: 33726
Debate Rounds (5)
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TomJoad

Pro

Bank loans and students loans are essentially completely back by the government. The only Major difference is that student loans can not be wiped out by bankruptcy law. With the worries of not having enough Doctors or enough Americans being able to compete in STEM fields is there is no excuse for for profit banks to receive a better rate and more protection from bad decisions then Americans trying to improve themselves.
Crevaux

Con

To begin with, I would like to clarify what Senator Elizabeth Warren's first bill is. During her election campaign last year, she used the student loan crisis as a way to get more votes and vowed to find a solution for the millions of Americans that are being burdened by student loans.

The bill, from what I know (and I invite Pro to inform me if I'm wrong), does not cover private student loans. It tackles the high interest of Stafford Loans, which are student loans issued by the Department of Education and financed by the Federal Reserve System. Now, there are two kinds of Stafford Loans: the subsidized and the unsubsidized ones.

The subsidized loans are available, since 2012, to undergraduate students who show they cannot afford paying back the interest; the federal government covers the costs of the interest instead. The unsubsidized loans include all Stafford Loans for graduate and professional students and undergraduate students who don't meet the financial requirements for the subsidized ones.

I can't be sure about the numbers, and they change from time to time. But I believe the current interest rate on Stafford Loans is above 5%. Senator Warren wants to bring down the rates to below 1%, and draws a comparison with the federal funds rate, which is the interest rate at which the Federal Reserve loans money to private banks, and which isn't higher than 0.25-0.75%.

However, there are many problems with this proposal. Part of the reason why Stafford Loans cost so much is because it is a self-funded program. Bringing down the interest rate can do two things: lead to more inflation as the Federal Reserve would have to start funding it, or underfund the program on the long-term, which will lead to less loans being available to students in the future.

Lowering the interest rate will also increase the education bubble and push all tuition prices up as more students will be applying for financial aid. Meanwhile, education standards will go down as too many students will have access to the highest universities.

Warren is right to point out that the low federal funds rate is unfair. Indeed, it is, and the low bank interest rates is what brought us the Great Recession (as well as the Great Depression of the 1930s). But the solution to more fairness is not to bring student loan rates down artificially. It is to hike up bank interest rates to the same rate as student loan rates.

I await for Pro's answer in what promises to be a good debate.
Debate Round No. 1
TomJoad

Pro

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Crevaux

Con

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Debate Round No. 2
TomJoad

Pro

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Crevaux

Con

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Debate Round No. 3
TomJoad

Pro

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Crevaux

Con

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Debate Round No. 4
TomJoad

Pro

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Crevaux

Con

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Debate Round No. 5
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