Sen. Elizabeth Warren (D-Mass.) introduced legislation last week that would allow student borrowers to refinance at lower interest rates offered to new borrowers under the Bipartisan Loan Certainty Act passed by Congress last year.
The Bipartisan Loan Certainty Act allows new borrowers to take out federal student loans at an interest rate of 3.86 percent, the same rate that would, under the legislation, be offered to borrowers with outstanding loan debt.
If enacted, the bill would be funded by the Buffett Rule, which would impose a minimum tax rate on households with an annual income of $1 million or more.
“Exploding student loan debt is crushing young people and dragging down our economy,” Warren said. “Allowing students to refinance their loans would put money back in the pockets of people who invested in their education. These students didn’t go to the mall and run up charges on a credit card. They worked hard and learned new skills that will benefit this country and help us build a stronger middle class and a stronger America.”
The legislation would also provide private student loan borrowers in good standing with the option to refinance at the same rate—borrowers who do so will receive the same protections offered to federal student loan borrowers.
Not all borrowers, however, will be eligible to refinance loans at the current rate. Warren’s legislation requires the Department of Education to “establish eligibility requirements based on income or debt-to-income ratio that take into consideration providing access to refinancing under this section for borrowers with the greatest financial need.”
A companion bill was also introduced in the House by John Tierney (D-Mass.) and George Miller (D-Calif.).