A bill that would have allowed millions of private and federal student loan borrowers to refinance their debts to the lower rate currently being issued on new federal and private student loans was once again blocked in the Senate.
The Bank on Students Emergency Loan Refinancing Act, which was first introduced by Massachusetts Sen. Elizabeth Warren in May, previously failed a Senate provisional hurdle in June.
The Hill reports that on Tuesday afternoon Warren asked for unanimous consent to vote on her bill. However, Sen. John Cornyn of Texas objected unless an open amendment process would be allowed, a move which Warren said she couldn’t agree to.
“Life is about choices. Each of us have made a choice on education, like where we’re going to go to school and what we’re going to study,” Sen. Dick Durbin of Illinois said in a statement. “There was a choice made on the Senate Floor today…to ignore students across America who are struggling to make ends meet because of overwhelming amounts of student loan debt.”
The bill would have allowed federal and private student loan borrowers to refinance to rates set for first-time borrowers; 3.86% for Undergraduate Direct Loans, 5.41% for Graduate Loans, and 6.41% for PLUS Loans taken out by a student’s parents.
Borrowers looking to refinance their student loans would have to be current on their payments and meet debt-to-income ratios that would have been set by the Department of Education.
In addition to refinancing student loans, the bill set forth a number of tax reforms intended to enact what is called the “Buffett Rule,” a reference to billionaire Warren Buffett’s statement that he shouldn’t pay lower taxes than his secretary.
The bill encountered criticism early on when supporters were looking at how to finance such an endeavor. At the time the bill was introduced, Warren suggested funding could be found in the form of the estimated $66 million a GAO study found the government would make off federal student loans disbursed between 2007 and 2012.
Consumer groups previously urged legislators to pass the Act to potentially save consumers billions of dollars.
Our colleagues at Consumers Union said the bill promotes “common sense solutions to the student debt crisis that will have a meaningful impact on the lives of millions.”
“[The Act] will help borrowers pay down their loans faster and give them the chance to put the extra money they save each month toward purchases or investments that stimulate the economy,” CU senior policy counsel Pamela Banks and staff attorney Suzanne Martindale wrote in June.
Consumers Union estimates that approximately 40 million consumers currently have student loan debts totaling $1.2 trillion. The majority of outstanding student loans have interest rates fixed from the time they were taken out, and while market rates are historically low right now, at the time most were issued federal loan rates were at 6.8% or higher.
With one-in-three students loans considered delinquent and often affecting a borrower’s ability to make purchases in the future, the Act would offer much needed reprieve for college students left with mountains of both federal and private student loans.
GOP blocks Warren’s student loan bill [The Hill]
by Ashlee Kieler via Consumerist
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