Congressmen Mark Pocan, D-Wis., and Scott Peters, D-Calif., along with 21 other House Democrats, have introduced legislation to lower all federal student loans to 4 percent and allow borrowers to refinance their student loans at a lower rate.
H.R. 4622, the Federal Student Loan Refinancing Act, is a companion to a bill that was introduced in the Senate on Friday by Sen. Kirsten Gillibrand, D-N.Y.
“Two-thirds of Americans now leave college weighed down by massive student loan debt, unable to achieve their dreams and contribute to the growth of the economy,” Pocan said in a statement. “Our bill will allow nearly 40 million Americans to refinance their student loans, just like you can refinance a house or car loan, freeing up funds to buy a house, get a new car, support a family, and pursue greater economic opportunities. Congress should be doing all that it can to make a college education as affordable and accessible as possible. While there are many steps that need to be taken in order to increase college affordability, this bill addresses an issue that will help 90 percent of consumers with existing student loan debt. This important legislation will respond to the immediate need for relief from the student loan crisis.”
Pocan and Peters cited the impact of student loan debt in their home states. According to research by One Wisconsin Institute, the student loan debt crisis has been shown to be a drag not just on borrowers’ household budgets, but the entire state economy, reducing new car purchases by over $200 million annually and making middle-class households with student loan debt more likely to rent than own a home. In Wisconsin, the average student graduates from college owing $22,460 in student loans. Nearly 800,000 individuals in Wisconsin currently have outstanding student loans. By allowing the average borrower to refinance their loans at 4 percent, they would be saving $8,483 over the 20 year life of the loan.
In California, 13.7 percent of consumers have student debt, owing an average of $25,650 in student loans. In addition, 11.9 percent of all California borrowers have defaulted on their federal loans between 2009 and 2012. Currently, nearly 4 million borrowers in California have outstanding federal loans. By allowing the average borrower to refinance to 4 percent, they would be saving $9,668.15 over the 20-year life of the loan.
“Affordable higher education for lower- and middle-class families has been central to the American story, including my own," Peters said in a statement. “I would not have been able to attend college without student loans and work study programs. We should be making it easier and more affordable for students to get a college education, not keeping it financially out of reach for middle class families. We need to educate our kids to be competitive in the global economy; it’s an investment in our economic future, and an investment in American families. Students and families across San Diego would save thousands of dollars under this legislation, giving them greater flexibility when they graduate, and providing some necessary, and welcome, relief to those struggling to advance themselves.”
“I am proud to stand with Rep. Pocan and Rep. Peters, and their cosponsors, to address the crushing amount of student debt facing our graduates and their families,” said Gillibrand. “It is clear that higher education is the clearest path to the middle class, yet there is now over one trillion dollars in outstanding student loans, many with outrageously high interest rates. As a result, instead of starting businesses and families or buying homes and cars, these graduates and families need decades to pay off their debt. There is a solution is right in front of us—allow our graduates to refinance their debt in the same way that our businesses and homeowners do. Providing this commonsense solution will strengthen the middle class and grow our economy. We cannot afford any more delay.”
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