Of the $1 trillion in student loan debt, over $800 billion is backed by the federal government. The interest rate for the majority of federally backed student debt exceeds 6 percent. Meanwhile, big banks can borrow at the FED discount window at much lower rates and homeowners can currently refinance their mortgage at a little more than 3 percent. Don’t students and their families who are trying to finance a college education deserve similar treatment? I think so.
That’s why I introduced legislation, along with Sen. Jack Reed of Rhode Island, to overhaul the federal student loans program so borrowers have access to the lowest rate possible. Some want the federal loan programs to continue to make a profit from students and families. I would disagree and argue that, once an appropriate interest rate is set, good policy dictates that the nation, our economy and families will profit from students affordably completing school and becoming contributing members of society.
Additionally, as part of our bill, student borrowers will be able to responsibly refinance their existing debt. This component of our legislation is critical for millions of students across the country. It is also anticipated to increase the likelihood of repayment and have significant economic benefits. In fact, the Center for American Progress has examined refinancing and put forward an estimate that indicates refinancing for only those federal student loans with an interest rate above 5 percent could lead to savings of $14 billion for individual borrowers in 2013 and inject as much as $21 billion into the economy in the first year alone.
A local resident recently wrote to me and said, “in America, education is everything.” She’s right. A college education continues to be the pathway to increased opportunity for success, but Congress has to do more to ensure those students who pursue higher education can afford it. In the weeks and months ahead, I’ll continue to press for common sense – and hopefully bipartisan – solutions that help our students and their families.
U.S. Rep. John Tierney represents the 6th Congressional District and is the only Massachusetts member of the Education and Workforce Committee. He invites you to share your student loan stories on his Facebook page at www.facebook.com/CongressmanJohnTierney.