Declaring that the burden of student loan debt is “an emergency,” Massachusetts Sen. Elizabeth Warren took to the Senate floor on Tuesday to introduce a bill that would allow graduates to refinance their loans at lower rates.
“Student loan debt is exploding. And it threatens the stability of our young people and the future of our economy,” Warren said.
Indeed, a major impediment holding back millennials from entering the middle class is student loan debt. Warren’s bill, the Bank on Students Emergency Loan Refinancing Act, would allow borrowers with existing student loan debt to refinance at the same rate current undergraduates receive, which currently stands at 3.86 percent.
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Homeowners can this week refinance their homes at a 15-year fixed rate average of 3.25 percent and for 30 years at an average of 4.25 percent. A car loan can be had for under 3 percent. Yet a college graduate faces interest rates of nearly 7 percent or higher on existing undergraduate loans. With that loan burden, young adults simply cannot afford to buy that car, get that mortgage or take on the financial commitments of a marriage.
Warren’s bill would not add a single dime to the national deficit. The bill would be completely financed by enacting the “Buffet rule,” which would increase the income tax rate of Americans earning more than $1 million annually, so that these high earners are paying tax rates that are at least as high as middle-income workers. It’s egregious that millionaires and billionaires currently receive special tax breaks that allow them to pay lower effective tax rates than middle-class families.
And that’s something most Americans can agree on, according to polls highlighted on our Populist Majority website:
- 71 percent believe Congress should pass the “Buffet rule.”
- 69 percent of millennials favor enacting the “Buffet Rule.”
- 73 percent believe that corporations pay too little in taxes and that America should eliminate corporate loopholes to stimulate the economy.
Big banks aren’t the only ones making money off the backs of students. So is the federal government. In April the Congressional Budget Office found that interest from the federal student loan program will bring in $16.2 billion in additional revenues. That adds up to $127 billion over the next 10 years.
Student loan debt is now approaching $2 trillion – talk about a bubble waiting to burst. Between 2004 and 2012, the average amount an individual had in student loan debt increased by 70 percent; the average for a college graduate is now nearly $30,000. And each year, students are taking on more and more debt as college fees rise and employment opportunities remain scarce. This truly is an emergency.
“It doesn’t have to be this way,” Warren said. “There is no reason on Earth that some kids get a better deal when they all worked hard to do exactly what we wanted them to do: Get an education.”
The ability to refinance at lower rates would alleviate the economic woes of nearly 40 million Americans with outstanding student loans. Refinancing would put hundreds and even thousands of dollars back into the pockets of individuals who need it the most.
Warren is right: Instead of kicking students when they are down, we should end the student debt crisis.