As the United States' total student loan debt reaches $1.2 trillion, Sen. Elizabeth Warren (D-Mass.), calling the situation an "economic emergency," is pushing for legislation that will assist borrowers in refinancing what they owe.
Kimberly Hefling, in a report for ABC News, said that Warren's bill could allow millions to refinance their federal loans at the current interest rate, which at this time is 3.86%. Democrats are focusing on college costs as the November election draws near. Rep. George Miller (D-Calif.) and Rep. John Tierney (D-Mass.) will file a similar bill in the House.
In 2013, Congress reached a deal that joins student loan interest rates to financial markets for students who applied beginning last July. This bill, filed by Warren on Tuesday, will be tied to tax raises on the wealthy, but faces many obstacles before passing.
"When interest rates drop, people can refinance their home, they can refinance their business debt. It's regarded as a smart move for any consumer or business. But student borrowers are prohibited from doing that under most programs," Warren told website Mass Live. "This bill says we're going to change that and let them refinance that down to current low rates."
Warren agrees with and will enact the "Buffet Rule". This "rule" was extrapolated from a statement made by Warren Buffet, in which he opined that his secretary should not be taxed at a higher rate than he was being taxed. Robert Rizzuto, writing for Mass Live, reports that Warren's bill would increase the tax rate on Americans earning more that $1 million a year.
As of now, 1 in 7 student loan recipients default on their student loans within three years of the start of repayment. Warren added that 40 million people are currently carrying the burden of school loan debt. Cutting their interest rates has the potential of saving them hundreds, even thousands of dollars in interest payments every month. This measure, according to Warren will mean savings for the consumer. Those savings will then be funneled back into the economy.
"That's money they can use to build an economic future and to strengthen the economy," Warren said.
Those against the bill counter that interest from student loans given between 2007-2012 would yield $66 billion to the federal government. Warren says that the government making such a profit from Americans who are trying to improve their lives and better themselves is "just plain wrong".
This legislation is a part of what the Democrats call their "Fair Shot Agenda" and includes the raising of minimum wage and passing equal pay legislation.
So far, the push for these laws has failed, states Tess VandenDolder, writer for In the Capital. Republicans balk at the increase in tax rates for the wealthy.
However, the Republicans are focused on winning over young voters, and that could spark bipartisan support for these reforms. Adding an amendment that makes the tax rates hikes "revenue neutral" is a step that could garner some support from the GOP.