Senator Kirsten Gillibrand has just introduced the Federal Student Loan Refinancing Act, legislation which would allow students to refinance their college debt at a much lower fixed rate of interest. These reforms are especially needed now, because in July student loan rates in the US are set to double to nearly 7%. Strangely, this is also happening at a time when our government continues to allow billionaire Wall Street bankers to borrow money for a small fraction of that cost.
This important legislation could potentially save students billions in education debt, and would also function as a massive economic stimulus. Research from the Center for American Progress found that such proposed student loan refinancing would increase disposable income nationwide by an estimated $14.5 billion in just the first year.
The Huffington Post recently reported details of the senator’s bill, which would mandate that the U.S. Secretary of Education immediately refinance nearly 90% of all existing federally backed student loans:
The plan sponsored by Sen. Kirsten Gillibrand (D-N.Y.) would force the U.S. Secretary of Education to automatically refinance most government loans carrying interest rates above 4 percent into fixed, 4-percent loans. Roughly nine of 10 federally-backed loans would be affected, saving nearly 37 million borrowers billions of dollars in annual interest payments.
“At a time when corporations, homeowners and even local governments are refinancing at historically low-interest rates and saving millions of dollars, students and families who take out loans to pay for college are getting left behind,” Gillibrand said. “Ensuring that our graduates are not saddled with unmanageable debt by keeping interest rates low is just common sense.”
Senator Gillibrand photo by Alex Wong