A Curious Arbitrage

by Asher B. Edelman

An interesting fight looms in Congress. The Tea Party lead Republicans are fighting to double the interest rates on student loans to 6.8%.

The Treasury (U.S. Government) borrows from and through the banks at a rate of 1% to 3%. The Fed (U.S. Government) then loans money borrowed by the Treasury (U.S. Government) to the banks at rates of 0% to .25%.

Students now borrow at about 3.5% with a Tea Party push towards 6.8%. Are we mortgaging our future to prop up moribund bankrupt institutions or are we simply following the colonial master system of “keeping them dumb and barefoot” to maintain the status quo?


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