House Democrats Introduce Federal Student Loan Refinancing Act
WASHINGTON, D.C.—U.S. Rep. Mark Pocan (WI-02), U.S. Rep. Scott Peters (CA-52), along with 21 House Democrats, today introduced H.R. 4622: Federal Student Loan Refinancing Act. The Federal Student Loan Refinancing Act would call on the Secretary of Education to automatically lower all federal student loans to 4 percent – which is near the current 30-year mortgage rate. Refinancing allows the borrower to replace his or her existing debt with a new loan at a lower interest rate. This means that borrowers will reduce the cost of their debt and free up income for purchases that will create a ripple effect on the economy. The bill introduced today is the House companion to S. 1066 which was introduced by New York Senator Kirsten Gillibrand in the U.S. Senate.
“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. “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% of consumers with existing student loan debt,” Pocan continued. “This important legislation will respond to the immediate need for relief from the student loan crisis.”
“Affordable higher education for lower and middle class families has been central to the American story, including my own," Rep. Peters said. "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."
Peters continued, "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 Senator Kirsten 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 common sense solution will strengthen the middle class and grow our economy. We cannot afford any more delay. "
According to original research by One Wisconsin Institute, the student loan debt crisis has been shown to be a huge drag not just on borrowers' household budgets, but the entire state economy, reducing new car purchasing by over $200 million annually and leaving 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%, they would be saving $8,483 over the 20 year life of the loan.
In California, 13.7% of consumers have student debt, owing an average of $25,650 in student loans. Furthermore, 11.9% 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% they would be saving $9,668.15 over the 20 year life of the loan.
Congressman Pocan represents the 2nd Congressional District of Wisconsin which includes the state’s largest university – the University of Wisconsin-Madison. As a member of the Education and Workforce Committee, Congressman Pocan has been especially focused on college affordability issues affecting working class families. Congressman Pocan has worked very closely on student loan refinancing policies.
In the fall of 2013, Congressman Pocan introduced a bill that would allow borrowers to refinance their loans whenever lower rates become available. Rep. Pocan is also an original cosponsor of the Bank on Students Emergency Refinancing Act which was introduced in the House by Representatives Tierney and Miller and in the Senate by Elizabeth Warren. This legislation further underscores the importance of allowing borrowers to refinance their loans by including refinancing options for both public and private loans.