Bill Gives Struggling Borrowers the Opportunity to Refinance and Eases Burden for Millions of Americans in Student Loan Debt
Washington D.C. – At a press conference today with her Senate colleague, U.S. Senator Tammy Baldwin announced her support for new legislation to give everyone a fair shot at affording a college education.
Specifically, the new bill will allow borrowers that have both federal and private undergraduate loans at interest rates – nearly 8 percent, 9 percent, and sometimes 14 percent and higher – to refinance at today’s lower rates of 3.86 percent with no refinancing fees.
This new legislation to make college more affordable is a critical piece of the Senate Democrats’ fight to give all Americans a fair shot.
Under the proposal, a student with an average outstanding debt load of $30,000 paying a 6.8 percent interest rate would save about $5,000 by refinancing to today’s lower rate.
Borrowers with graduate and PLUS loans would also be able to refinance to lower rates.
“Making college affordable is one of the most important steps we can take toward building a strong path to the middle class for all Americans,” said Senator Baldwin.
“A college education should be a path to prosperity not a path to indebtedness, but student loan debt is holding back an entire generation and creating a drag on economic growth for our country.
The ability to refinance at lower rates provides some relief to borrowers and gives them a fair shot at building a stronger future for themselves.”
Under the bipartisan Student Loan Certainty Act of 2013, students that took out new undergraduate loans for the 2013-2014 school year pay a rate of 3.86 percent.
However, this does not assist the millions of young professionals saddled with an average of $30,000 in student loan debt that took out loans earlier than 2013 and are paying sky-high interest rates.
Senators today announced their push for new legislation, which will allow students and young professionals to pay back their outstanding federal and private loans at the same rates as new borrowers, without being charged a fee for refinancing.
Nearly 40 million Americans have outstanding student loans. According to new data from the Federal Reserve, student loan debt grew by $31 billion from January to March of this year, now totaling $1.1 trillion across the country, making student loan debt the fastest growing household debt category.
The rising debt load makes it more difficult for young professionals to purchase homes, automobiles, and other goods, creating a huge drag on the overall economy.
“I recently sat down with a group of Wisconsin students.
And they shared with me their concerns and the burden the cost of a higher education puts on them and their families,” said Baldwin.
“Their message to Washington is simple- there is debt crisis in America and it is time to take action. These students, like every young person in America, they deserve a fair shot at an affordable education.”
The average student loan debt among those who borrow to get a bachelor’s degree is nearly $30,000 – and a shocking 30 percent of Federal Direct student loan dollars are in default, forbearance, or deferment. Meanwhile, the Government Accountability Office (GAO) recently projected that the government will bring in $66 billion in revenue on its federal student loans made between 2007 and 2012.
The legislation is fully funded by enacting the Buffett Rule, which would limit special tax breaks for the wealthiest Americans that allow millionaires and billionaires to pay lower effective tax rates than middle class families.