Students Emergency Loan Refinancing Act of 2015 to save average borrower $2,000 over lifespan of their loan
On March 18, Congressman John Garamendi (D-Fairfield, CA) co-sponsored the Bank on Students Emergency Loan Refinancing Act of 2015. The act would allow borrowers of both public and private student loans, borrowed before July 1, 2015, to refinance their loans so that they can take advantage of lower interest rates being offered.
Congressman Joe Courtney (D-CT) introduced the bill to the House of Representatives, and Senator Elizabeth Warren (D-MA) introduced it to the Senate.
“When looking at our economy and determining what’s holding people back the most, student loan debt comes nearest to the top,” said Donald Lathbury, communications director for Congressman Garamendi.
The Department of Education estimates that 25 million borrowers across the U.S. could benefit from this act and that on average, a borrower could save $2,000 over the lifespan of a student loan.
According to a press release from Congressman Garamendi’s office, some borrowers are paying rates as high as eight percent on their student loans. Under the Bank on Students Emergency Loan Refinancing Act, current borrowers could refinance their loans to a 3.86 percent annual interest rate. Graduate school loans could be refinanced to 5.41 percent, and parent loans for a child’s education to 6.41 percent.
According to Lathbury, student loan debt comes in only second to mortgage debt as the highest volume of household consumer debt, surpassing credit card debt.
Fedja Sefic, recent UC Davis graduate, hasn’t had a difficult time paying back his student loans and has been able to save some money since graduating in June of 2014. However, he found his student loan experience to be less challenging than the experiences of his fellow recent graduates.
“Someone I know now is struggling to pay for her student loans and can’t make her monthly payments. With her interest rate, this total keeps increasing and never seems to go down when she does make payments. With lower interest rates, this would definitely help with the whole ‘helplessness’ of the situation and not feeling like she’s forever in debt,” Sefic said.
Sefic said he feels lower interest rates would be extremely beneficial to recent grads who, in addition to paying back student loans, also have higher costs of living among other new burdens on their bank accounts.
“It just honestly feels like we’re being punished for pursuing an education. We have to start paying within six months of graduating and if we don’t, we get hounded by the loan companies to make payments. With the struggle of getting job on top of high rent prices, especially in [the Bay Area], it’s hard to save any money and when you do, it goes to your student loans,” Sefic said.
Mimi Wyatt, a third-year community and regional development major, said that she hasn’t had a difficult time obtaining sufficient loans to cover her tuition costs, however, she does worry about her future when it comes time to start paying her loans off.
“Being a student is hard, and having debt after graduating is going to be difficult. I am interested in pursuing a career in the non-profit sector, which is associated with low wages,” Wyatt said. “I am alright with not making much in life as long as I am happy with my work, but struggling is the last thing I want and [it is] what I am always told will happen once I share my future career interests [with others].”
One of the goals of this act is to encourage people to obtain degrees more easily.
“We need to do more to make college as affordable as possible, and we need to do more to encourage qualified students to apply to schools that they may have historically been discouraged from applying to,” Lathbury said.
According to Lathbury, the demographics of people that often don’t pursue higher education or drop out of college, are usually people that have lower income. This bill could open create the possibility of obtaining a bachelor’s degree or a more advanced degree for such a demographic.
Lathbury said that what the bill needs to pass is for students living in areas represented by republican congressional representatives to make their voices heard on this issue.
“We need students and allies of students to make it clear that this is a priority,” Lathbury said.
Graphic by Jennifer Wu.