Bill Aims To Ease Student Loan Burden
"The Bank on Students Emergency Loan Refinancing Act — which [Sen. Dick] Durbin co-sponsored with Sen. Elizabeth Warren, D-Mass. — would allow students with older, higher-interest loans to refinance at lower rates," The News-Gazette reports.
"It would apply to people who borrowed through the Federal Family Education Loan program and the Ford Federal Direct Loan program, as well as those who took out private loans, which often have variable interest rates, hefty origination fees and few consumer protections, Durbin said.
The new rates would be 3.86 percent for undergraduates with direct loans, 5.41 percent for graduate loans and 6.41 percent for PLUS loans taken out by parents. Borrowers would have to establish eligibility; the program would not be open to those who have already defaulted. ...
Because interest rates are low, the government is essentially making money off those student loans, Durbin said. The refinancing bill would be paid for by imposing the 'Buffett rule,' as Durbin put it. Investor Warren Buffett has proposed a minimum 'millionaire tax' on wealthy Americans who pay a lower effective tax rate than Americans with modest earnings, he said.
Durbin said the bill could be voted on as early as next week in the Senate. He expects opposition from Republicans and others against any tax increase, but said this is an issue that hits home with many voters and legislators. ...
Dan Mann, UI director of financial aid [and NASFAA treasurer], said the new rates would provide flexibility for students who are struggling to repay their debt by making payments more affordable. About half of the UI's undergraduates borrow for their bachelor's degree, graduating with an average $24,657 in debt.
The bill would mostly benefit UI graduate students, who pay higher rates than undergraduates, Mann said. It would also help the roughly 1,200 undergraduates who have taken out almost $16.5 million in higher-priced private loans, Mann said.
About 3.4 percent of UI graduates default on their loans within three years, compared to 14.1 percent statewide and 14.7 percent nationally. The higher rates are inflated by harmful loan practices at for-profit universities, which often steer students into higher-cost loans with poor repayment terms, Durbin said.
The problem has impact far beyond students and their families, he said.
'There are so many young people with debt from worthless for-profit colleges who can't borrow money to go to a real school. Some of them burdened with student debt can't buy a car, couldn't consider buying a house,' he said. 'I've had them literally tell me that 'We can't have kids because of our student debts.' So it really is impacting their participation in our economy.'"
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