February 10, 2014 by Latasha Myers
Do you have a mortgage or car loan and wish to refinance to a lower interest rate? Congratulations, you have that consumer protection. But do you know who doesn’t? Student loan borrowers. Luckily, new legislation soon to be introduced in the U.S. Senate may change this.
U.S. Senator Elizabeth Warren (D-MA) recently announced her plans to introduce a bill that will allow students to refinance their federal student loans to the lower interest rates under the Bipartisan Student Loan Certainty Act of 2013. A measure that has the potential to save student loan borrowers thousands of dollars over the course of a loan’s life.
Background on the Bipartisan Student Loan Certainty Act of 2013:
What it does– The bill ties student loan interest rates to a market-based, fixed-rate based each academic year on the rate on the 10-year Treasury note. It laments terms, rates will fluctuate with changes in the market, but will be fixed, and locked in once a student takes out their loan. The table below illustrates student loan interest for the current school year, and what they were before the Act was passed.
So undergraduate students who took out a loan before July 1st are paying nearly a three percent higher interest rate than if they had taken that loan out afterwards. For a graduate who took out $25,000 in student loans, for example, with a 6.8 interest rate (making a monthly payment of $250), by the time they pay off their loans they would have paid back nearly $12,000 more in interest payments alone!
Considering that a report released last week by the Government Accountability Office (GAO) revealed that the government stands to make $66 billion in profit from student loans, there needs to more action to reduce interest rates. Our government should be implementing policies that help make college more affordable, not profiting off the backs of students who depend on student loans to pay for college.
Senator Warren’s legislation to allow students to refinance their student loans to a lower rate is a welcomed policy that would help students who have already incurred student loan.
Stay tuned for an update when the bill is introduced.
And continue to show your support for the college affordability movement by telling us what #AccessMeans to you.