Senator Elizabeth Warren has been a loud and vocal supporter of those suffering under the weight of student loans despite the fact that she’s having a hard time raising support from her fellow legislators. She’s offered up several pieces of legislation to help cash-strapped borrowers and all have been either ignored or voted down. But finally, one of her bills has been given a second chance thanks to backing and endorsement by President Obama.
Senate Bill 2432 – Bank on Students Emergency Loan Refinancing Act
S 2432 would allow student loan debtors that have borrowed at higher interest rates to refinance their loans at the current federal loan interest rate which is 4.66%. If you’ve got interest rates higher than this, getting a drop to less than 5% can be very helpful. Graduate loans and PLUS loans could be refinanced at their current rates which are now 6.21% and 7.21% respectively.
If this bill passed, you could also refinance a consolidated loan – they would look back at what types of loans you originally had that were consolidated and apply the current interest rates to the remaining balance of those loans and then average them out as if they were being consolidate anew. This latter part is a little complicated, but doable for somebody with the know-how.
The bill also proposes to allow private loan borrowers to refinance as a federal loan. Undergraduate loans would be refinanced at 4.66% currently, graduate or professional degree loans at 6.21% and ones that combined undergrad and post-grad would be at 7.21% based on current rates. Refinanced private loans would not be eligible for Public Service Loan Forgiveness. These loans would be eligible for IBR or PAYE benefits.
Benefits of Senator Warren’s Legislation
Generation Progress, a branch of the Center for American Progress, analyzed the potential impact of S 2432 and prepared fact sheets for every state. We looked through these and will discuss California’s here as an example. According to their research, more than 2.3 million borrowers in CA alone would benefit from refinancing – that’s more than half of the student loan borrowers in the state.
They report that refinancing would save borrowers at least $2,000 over the life of their loans and would infuse more than $21 billion into our economy. This is money that is now going solely to either private lenders or into the coffers of the federal government when it could instead be stimulating jobs and opportunities for graduates. This is a huge deal for all of us.
To find out how refinancing your student loans under Senator Warren’s proposed bill, click to use Generation Progress’ calculator.
President Obama has encouraged bipartisan support of S 2432 although Republicans have said the options of IBR and PAYE are enough for now. The last time this bill was up for a vote, it was just two votes shy of what it needed to move forward. Now is the time to raise your voice and support this important bill. Contact your Senators and tell them to support S 2432 then tweet your support using #ItsOurInterest to spread the word and encourage your network to push their legislators to also vote yes.
No matter what type of loans you have – public or private – sign up for Tuition.io’s free student loan tool to track and optimize your debt. You’ll see what you owe in one easy to understand dashboard and can experiment with how changing repayment plans or making additional payments will change what you pay, how long it will take you to pay off your loans and your interest costs. Also read our blog often for more legislative news, tips on dealing with your student debt and practical every day money advice.