Democratic Sen. Elizabeth Warren of Massachusetts wrote on her blog Friday that in the coming months, she will be introducing legislation “to allow eligible borrowers with high interest student loans to refinance at new rates that are at least as low as those now being offered to new borrowers in the federal student loan program.”
Under current laws, refinancing of student loans is extremely rare but Warren wants to make that option more widely available both for the borrowers and the economy as a whole.
“The idea is pretty simple,” she explained. “When interest rates are low, homeowners can refinance their mortgages. Big corporations can swap more expensive debt for cheaper debt. Even state and local governments have refinanced their debts. Letting recent graduates refinance their student loans puts real money back in the pockets of middle class families.”
The interest rate on most of the more than $1 trillion in student loan debt exceeds 6 percent, three times what it costs the federal government to borrow, according to a 2013 column in Time.
With the cost of college continuing to rise, there is absolutely no sound economic reason to deny graduates fair interest rates on their loans – especially when high-interest loans yield the government huge profits.
In early February, in response to a Government Accountability Office report, Warren voiced her dismay.
‘‘We cannot bury our heads in the sand and pretend the profits don’t exist, or use accounting tricks to make them disappear,’’ Warren said in a Feb. 1 Associated Press article. ‘‘It’s time to end the practice of profiting from young people who are trying to get an education and refinance existing loans.”
On her blog, Warren wrote that “(t)ying students to a lifetime of financial servitude as a condition of getting an education … doesn't reflect our values.”
Warren is asking people who support her plan for to allow refinancing of student loans to sign up through her website, saying she will need “the help of tens of thousands of people all across the country to make the case for why this is so important.”