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Democrats Plan Student Loan Push in June
Posted at 1 p.m. on May 14, 2014
Senate Democrats plan to make their new push on student loan interest rates shortly after the Memorial Day recess.
But, as usual, there’s an issue with offsets.
Sen. Elizabeth Warren led a group of Democrats and Washington, D.C., area college students in detailing the proposal at an event Wednesday morning in the Capitol.
“There is no forgiveness here of principal,” the Massachusetts Democrat said of the proposal. “Students should have to pay back the money they borrowed, and they have to pay it back at a rate that fully covers the administrative costs, the costs of borrowing the money, the costs of the bad debt loans and still produces something more for the U.S. government.”
Sen. Charles E. Schumer of New York, the No. 3 Democratic leader, said he expected the student loan issue would reach the Senate floor in the first two weeks of June.
Schumer said were waiting for “the magic of CBO,” to figure out precise details. The idea, however, is to fully offset the cost associated with the refinancing and the lower interest rates using the millionaire surtax that has come to be known as the “Buffett rule.”
That offset isn’t likely to get much traction, but the bill’s supporters say they are open to alternatives. Exactly how much money would be needed won’t be known until the final score comes in from the Congressional Budget Office.
In setting a schedule of lower loan rates for student loan refinancing — what would currently be 3.86 percent for existing undergraduate loans — borrowers could theoretically refinance private student loans with the federal government or other financial institutions.
“You’re able to take out a loan at 3.86, and if somebody wants to lend you money at 3.86, and they give the principal, you give it to the other bank and say here you go,” Sen. Al Franken, D-Minn., said. “So, the bank doesn’t really have that much of a say about it.”
“We picked these numbers because these were the numbers that virtually every Republican and a majority of Democrats agreed to just last July,” Warren said, referring to the 2013 law that revised the interest rate formula for new federal student loans. “Some of us would like to see lower numbers, but we want to get something through the Congress, we want to see a change. A change that could mean a difference of hundreds of dollars or even thousands of dollars.”