Student debt in the U.S. surpasses $1.7 trillion – all while an increasing number of borrowers find themselves unable to pay back their loans due to job scarcity and other extraordinary financial circumstances caused by the COVID-19 health and economic crisis.
Legislation from U.S. Sens. Mark R. Warner (D-VA), Jon Tester (D-MT), and Angus King (I-ME) would allow borrowers to get a better handle on their student debt during the COVID-19 crisis and beyond.
The Coronavirus Emergency Student Loan Refinancing Act of 2021 would ease the burden of the student debt crisis by:
- Allowing student loan borrowers to refinance their federal student loans as long as they are in good standing and meet eligibility requirements based on income or the debt-to-income ratio established by the Department of Education. Under the legislation, borrowers would be able to apply to refinance their Direct Loan or Federal Family Education Loan (FFEL).
- Giving borrowers the option to refinance their federal student loans at lower interest rates to the lowest yield of the 10-year Treasury note in the preceding six months, plus a fixed percentage rate established by the Student Loan Certainty Act of 2013.
- For undergraduate borrowers with Federal Direct Stafford, Unsubsidized, PLUS, and Consolidated loans, the interest rate would be equal to the lowest yield on the 10-year U.S. Treasury note in the preceding six months plus 2.05 percent.
- For graduate borrowers with Federal Direct Stafford or Unsubsidized loans, the interest rate would be equal to the lowest yield on the 10-year U.S. Treasury note in the preceding six months plus 3.6 percent.
- For borrowers with PLUS loans, the new interest rate would be equal to the lowest yield on the 10-year U.S. Treasury note in the preceding six months plus 4.6 percent.
Bill text is available here. A one-page summary is available here.
“All over the country, we have young people who made a substantial decision to invest in their future, but now find themselves saddled by overwhelming student loan debt during a pandemic that has tanked the economy and shattered the job market,” Warner said. “The way to get our economy back on track is not by having an entire generation of people who are unwilling or unable to make future financial commitments because they are buried by the loans they took out in their late teens or early twenties. This legislation will give student borrowers a real shot at paying back their debt so that in the near future they are able to invest in a home, start up a business, or save for retirement.”
“Young folks across our country are facing unprecedented financial hardship simply because they made a choice to invest in their futures,” Tester said. “These are the current and future leaders of our communities and it’s critical that they have financial security so they can make investments and purchases to drive our economy forward and help America bounce back from this crisis. This bill will provide student borrowers with more opportunities to pay back their loans so that they are better able to participate in their local economies without the fear of drowning in debt.”
“The coronavirus pandemic has hit our economy hard – and that’s a major problem for the millions of Americans who took out student loans to invest in their future,” King said. “As the coronavirus pandemic’s economic fallout continues to unfold, Congress needs to take steps to help these young people have added flexibility and options to meet these obligations. Our legislation provides paths to help get this debt under control – if enacted, it can improve financial prospects for these borrowers while also supporting the overall health of the American economy.”
This legislation has the support of a number of organizations, including the Disability Rights Education & Defense Fund, the Center for Law and Social Policy, the National Association of Realtors, and the Georgetown University Center on Education and the Workforce:
“Loans keep people from going to college, loans force students to major in lucrative subjects rather than follow their true work interests and values, and loans force people to postpone making decisions like buying homes and forming families, which hurts all of us. We are fortunate that Senator Warner recognizes this and has stepped up to do something about it,” said Anthony P. Carnevale, director of the Georgetown University Center on Education and the Workforce.
“High student loan debt is deterring families and individuals from pursuing the American Dream of homeownership, and its impact has been particularly significant on minority and millennial households. In fact, a 2020 NAR report found that student loan costs have been the single biggest factor inhibiting Americans’ ability to save for a down payment over the past five years. Realtors® applaud Senator Warner for furthering the critical national conversation regarding the impact of student loan debt on the broader U.S. economy, and look forward to working with him to advance this legislation through Congress,” said Charlie Oppler, president of National Association of Realtors.
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