Congressional Democrats on Tuesday announced legislation to allow existing student loan borrowers to refinance their debt at lower interest rates.
Senator Elizabeth Warren of Massachusetts and 22 of her Democratic colleagues introduced a bill that would let borrowers who took out both federal and private loans before 2013 to refinance that debt at the current interest rate on federal student loans. “Exploding student debt is crushing young people and dragging down our economy,” Warren said in a statement. “Allowing students to refinance their loans would put money back in the pockets of people who invested in their education.”
Representatives George Miller of California and John Tierney of Massachusetts plan to introduce identical legislation in the House. The refinancing program would be paid for under the Democrats’ proposal by enacting the so-called “Buffett Rule,” which would end some tax breaks for millionaires. That’s likely to face stiff opposition among Republicans.
The proposal is part of a broader election-year effort by Democrats to focus on college affordability and rising student loan debt. Other proposals by Senate Democrats would seek to hold colleges more responsible for student loan defaults.
Under a bipartisan agreement reached last year, interest rates on federal loans are now tied to Treasury notes. For the current academic year, interest rates were set at 3.86 percent for undergraduates and 5.41 for graduate students. The Congressional Budget Office projects that those rates will increase for the coming academic year to 5.09 percent and 6.64 percent, respectively. The rates will be officially set after a Treasury note auction this week.