Refinancing Student Loans Allows People To Achieve A Fair Shot
It seems as though everyone—homeowners, corporations, and even state and local governments—is taking advantage of the current historically low interest rates by refinancing their debt. It’s a win for individuals and for the nation as a whole, easing the burden of loan repayment and freeing up income for purchases that stimulate the economy.
But one group is getting left behind in the refinancing trend: students who take out loans to pay for their higher education. And there’s no group that needs it more:
Indeed, the cost of college tuition and fees has increased an astonishing 1,120 percent in the last 35 years. Student debt now tops $1.2 trillion, with the average graduating senior owing $29,400. One in five households owes student loan debt. Something needs to change.
Yesterday, Sen. Elizabeth Warren (D-MA) introduced a bill to address this issue that is crippling people’s economic security. The bill, called the Bank on Students Emergency Loan Refinancing Act, lets student loan borrowers refinance their loans just like other borrowers have been allowed to do. Generation Progress, a leader in promoting this issue, explains how it would work:
Borrowers with student loans currently have to pay them with interest rates of close to 7 percent or more for undergraduate loans, while students taking out new undergraduate loans pay a rate of 3.86 percent under the Bipartisan Student Loan Certainty Act, which President Obama signed into law last summer.
Warren’s student loan refinancing bill would allow our students and young Americans to pay back their outstanding loans at the exact same 3.86 percent rate.
The [Bipartisan Student Loan Certainty Act] was passed with bipartisan support with Senate Republicans signing onto that piece of legislation as recognition of the student debt crisis crippling the American middle class.
…[Warren's] legislation would be funded by the Buffett Rule, which limits special tax breaks for America’s millionaires and billionaires and helps middle class American families who have worked diligently toward furthering their career and adding value to the country’s economy.
Warren’s bill has 27 co-sponsors in the Senate, all Democrats. Republicans, meanwhile, oppose it because it is paid for with tax reform making sure millionaires don’t pay less in taxes than their secretaries — a policy that has had the support of nearly three-quarters of Americans.
Across the country, it’s getting harder and harder for Americans to afford a middle-class lifestyle. As we mentioned above, refinancing student loan debt along the lines Warren has proposed isn’t just about helping new graduates: young people, middle class families, and seniors will all be on better terms. Here are just a few more reasons why it an essential step:
- It puts money back in people’s pockets: A borrower paying back $30,500 at 6.8 percent would save just over $53 per month after refinancing.
- Student loan debt affects people of all ages: The number of education loan borrowers over the age of 60 has tripled since 2005, as parents and grandparents co-sign on loans for their kids.
- High interest rates disproportionately hurt people of color: Borrowers of color are more likely to depend on financial aid to attend college, including taking out more private loans and exposing themselves to greater financial risk.
BOTTOM LINE: We can strengthen our economy for the long term by improving our education system and raising the skills of American workers. But the costs of a college tuition keeps rising and student debt is spiraling upward. We should put more money back in people’s pockets by refinancing student loans, and Sen. Warren’s bill is a big step forward. Student debt is family debt and solving this problem will assist young people and their families, and help create economy that works for everyone, not just the wealthy few.