A bill that would’ve provided students with the option to refinance their federal student loans and potentially lower their interest rates was blocked Tuesday for the second time since its introduction this summer.
Despite a lack of progress on the issue from the federal government, one financial company now allows borrowers the option to refinance their federal loans into private ones. And while the contention in Washington continues, some experts say a higher student voter turnout rate could push lawmakers into action on student loans.
The bill, called the Bank on Students Emergency Loan Refinancing Act, didn’t have the chance to see a floor vote on its second introduction. On Tuesday, Sen. John Cornyn, R-Texas, proposed that legislators be allowed unlimited amendments to the bill, a provision with which the bill’s primary author, Sen. Elizabeth Warren, D-Mass., refused to comply.
“This is a classic political dogfight,” said Larry Jacobs, Humphrey School of Public Affairs political science professor. “Democrats are looking to energize students heading into the fall elections by reducing the interest they pay on students’ loans. … Republicans are resisting because Democrats would use a tax on the most affluent to pay for it.”
The proposed legislation would have increased federal spending by about $58 billion between 2015 and 2024, a cost to be financed by taxing some of the wealthiest Americans — a source Republicans refused to tap.
Nationally, the growing level of outstanding student loan debt — now around $1.2 trillion by recent estimates — continues to be a topic of debate.
“The bottom line here is it’s the same old fight about taxing and spending, and unfortunately, students are continuing to be the victims,” Jacobs said.
Sen. Al Franken, D-Minn., co-sponsored the bill and said in a Wednesday press release that he was disappointed with its failure, noting that the bill would have helped more than 550,000 Minnesotans who are currently struggling with student debt.
For 2012 graduates of the University of Minnesota’s Twin Cities campus, the average student loan debt is about $29,700, according to data from the Institute for College Access and Success, a nonprofit advocacy group.
Statewide, the average was slightly higher in 2012 at nearly $31,500, the fourth-highest average in the nation.
Jacobs said the continuing political struggle over student issues like high debt rates is likely a result of generally low student voter turnout rates.
“Students tend to be disaffected and lackadaisical about what is going on in Washington, so you see these kinds of fights,” he said.
One bank reacts
While lawmakers continue fighting over the issue, Citizens Financial Group, which has branches mainly in the northeast United States, announced Tuesday that it will allow borrowers to refinance their federal loans into private ones.
“When you’re out there for a few years starting to build this [financial] profile, we have heard many [people] are delaying major life moments … because of the [student loan] payments they have,” said Steve Sylven, vice president of media relations at Citizens.
Sylven said that while many banks allow their customers to refinance private student loans, Citizens Banks is the only one he’s aware of that allows them to refinance both federal and private student loans.
The federal government provides for the majority of student loans nationwide — more than 90 percent of the loans are federally financed each year, while the rest are private.
Still, staff with Franken’s office said passing federal legislation like the Bank on Students act is important to regulate student loans. Federal loans are safest to borrow, they said, because they often provide guaranteed borrower protections.
