On May 6, Sen. Elizabeth Warren (D-MA) introduced legislation to permit borrowers with outstanding student loan debt to refinance at the lower interest rates currently offered to new student borrowers. The Bank on Students Emergency Loan Refinancing Act would allow students now paying almost 7% to refinance at 3.86%, a rate set by the Bipartisan Student Loan Certainty Act, passed by Congress last summer. The interest rate would be fixed for the life of the refinanced loan.
A press release from Warren’s office noted that nearly 40 million Americans have outstanding student loans, and that the refinancing act could reduce payments for millions of individuals by “hundreds or thousands” of dollars a year. Among students who take out loans for their higher education, the average debt is approximately $30,000, and about 30% of Federal Direct student loans are in “default, forbearance or deferment,” according to the release.
Last month, John Tierney (D-MA) and George Miller (D-CA) introduced a companion bill in the House of Representatives. The Senate bill has 23 co-sponsors, all Democrats.