On Monday, President Obama announced some administrative reforms to help college graduates deal with their student loan debt. Under a 2010 law, students taking out new federal loans are assured that their repayments can never exceed 10 per cent of their income. The President will use his executive authority to extend this guarantee, known as Pay As You Earn, to five million holders of older loans.
Second, the President announced that the government will re-negotiate contracts with loan-servicing companies, such as Sallie Mae, to make it easier for students holding older loans to refinance at today’s low interest rates. Finally, the government will help borrowers learn about their repayment options by working with social media, TurboTax, H&R Block, and others to get the word out.
These are welcome reforms, but the President can only do so much on his own to help young Americans burdened by student loan debt. Legislation can do much more.
The student loan problem is a major one, not just for borrowers but for the nation. Senator Elizabeth Warren, from our neighboring state of Massachusetts, put it well in a June 9 email:
“Total debt is now $1.2 trillion, more than all outstanding credit card debt in America. The overwhelming burden of student debt keeps young people from buying homes, buying cars, starting small businesses, saving for retirement, and making purchases that strengthen our economy.”
Our own Senator, Kirsten Gillibrand, points out that New York graduates are saddled with $60 billion in student debt, with the average borrower owing $27,000.
On June 4, Warren introduced the Bank on Students Emergency Loan Refinancing Act (S. 2432) in the Senate. Similar legislation, H.R. 4582, was introduced in the House by Rep. John Tierney, Democrat of Massachusetts. These bills would allow 25 million borrowers to refinance their federal student loans, some taken out at rates of 6, 8, and even 10 per cent, at today’s lower interest rates of less than 4 per cent. To pay for relieving the student loan burden on middle class borrowers, Warren’s bill would require that taxpayers earning between $1 and $2 million per year pay a minimum federal income tax of at least 30 per cent, regardless of how many deductions and loopholes they take advantage of.
On Wednesday, a motion to proceed with consideration of the Warren bill came before the Senate. The vote in favor of proceeding was 56-38, including all the Senate Democrats and even three Republicans. But the Senate’s undemocratic filibuster rule requires 60 votes for a bill to proceed, and the motion failed. Meanwhile, Rep. Tierney’s bill will almost certainly not be allowed to come up for a vote in the Republican-controlled House. Thanks to Republicans, the interests of millionaires have once again prevailed over the interests of the rest of us.
In a statement issued after the Senate vote, Warren said
“I don’t plan to let this issue die. I plan to fight back. And I hope people all across this country will do exactly the same.”
Here in New York’s 23rd, we can fight back by electing the Democratic candidate, Martha Robertson, to the House of Representatives in November.
Update, June 13. Martha Robertson has started a petition demanding that House Republicans and Tom Reed focus on helping our students by reforming student loan refinancing. Sign here.