With federal student loan debt levels topping $1 trillion, one U.S. senator wants to give students a new option when paying back borrowed money.
Sen. Elizabeth Warren, D-Mass., is set to introduce legislation that would allow students to refinance their student loans, which she claims could cut down high debt levels.
“This exploding debt is crushing our young people,” Warren said in a speech at Suffolk University Law School earlier this month. “Tying students to a lifetime of financial servitude as a condition of getting an education does not reflect our values.”
Matt Cournoyer, Warren’s deputy press secretary, said full details of the bill are not yet available, but the bill will be introduced in the next few weeks.
About 70 percent of U.S. graduates have student loan debt after receiving a bachelor’s degree, according to the Institute for College Access and Success. Their average debt amount is $29,400.
Minnesota has the nation’s fourth-highest average student debt level at $31,497, the institute reports.
Sen. Al Franken, D-Minn., said he’s looking forward to Warren’s proposal.
“I think that a very high priority should be that we’re not making money off of our students,” he said.
Minnesota Student Association President-elect Joelle Stangler echoed Warren’s concerns regarding high student debt levels. While Stangler said she feels allowing student loan refinancing is a step in the right direction, she said lawmakers must also consider up-front college costs.
“They aren’t looking for long-term solutions; they’re trying to fix old problems rather than solving the new ones,” Stangler said.
In the Minnesota Legislature, Sen. Greg Clausen, DFL-Apple Valley, authored a bill similar to Warren’s plan that would allow students in Minnesota to refinance their private and federal student loans through the state’s Office of Higher Education.
“We’ve got a real problem across the country, and we have to look at a number of things to provide support for students and higher education,” Clausen said.
His bill isn’t likely to pass this year, due to the “unsession,” a push from Gov. Mark Dayton to focus the session on eliminating laws and taxes, but Clausen is hopeful for the next session. He’s currently working with OHE on specifics of the refinancing plan.
A federal bill that passed last summer tied interest rates for multiple student loans to the financial markets, which means those rates can fluctuate significantly from year to year.
Allowing students to refinance their loans would make the borrowing process fairer, said MSA vice president-elect John Reichl.
“I think the idea behind it is phenomenal from a student perspective,” he said. “As the government, it should be your job to help [students] get an education and help them become productive citizens.”
Clausen said student loan debt issues won’t be solved by only allowing students to refinance their loans. Instead, he said a variety of initiatives are needed.
“The refinancing of student loans is maybe one idea, one part of a bigger program that we need to look at,” Clausen said.
