Senator Warren's Bank of Students Emergency Loan Refinancing Act Provides Important Options for Refinancing Student Loans
This week, the Senate will vote on Senator Elizabeth Warren's Bank of Students Emergency Loan Refinancing Act, which would allow borrowers to refinance student loans at lower rates. Representatives Miller and Tierney have also introduced a companion bill in the House.
The Center for Responsible Lending joins a robust group of education, labor, student, and consumer organizations supporting the bill. In a statement issued today, Senior Policy Counsel Maura Dundon said:
Allowing borrowers to refinance their student loans to take advantage of lower rates and safer terms will make a measurable difference in the budgets of households across the country.
Today, the sum total of outstanding student loan is over a trillion dollars. The economic and personal toll that this debt has on American families is clear. The average student loan borrower takes on nearly $30,000 in debt, and research has shown that many young borrowers are failing to keep up with their payments. One in seven borrowers defaults on federal student loans within three years of beginning repayment. In total, 30% of federal direct student loans are in default, forbearance, or deferment. The Federal Reserve has reported concern that student loan debt is contributing to lower rates of savings, homeownership, and entrepreneurship among young Americans.
Private student loan borrowers, in particular, need the protection of refinancing into safer, more affordable federal loans. Some of the most vulnerable students at for-profit colleges borrow predatory private loans and they deserve relief. Other private student loan borrowers have high, variable interest rates and would benefit from refinancing into the lower rates and greater protections afforded by federal loans. Because the government would derive new interest income from these loans, refinancing private student loans into federal loans would earn the government $5 billion dollars, according to the Congressional Budget Office.
Earlier this week, President Obama signaled his support for this bill and for other measures to alleviate the burden of student loan debt, including expanding income-based repayment and reforming student loan servicing practices.
With the cooperation of both the executive and legislative branches, we can work to ensure that obtaining an education puts students on the path towards greater economic opportunity, not insurmountable debt.
About the Center for Responsible Lending: The Center for Responsible Lending is a nonprofit, nonpartisan research and policy organization dedicated to protecting homeownership and family wealth by working to eliminate abusive financial practices. CRL is affiliated with Self-Help, one of the nation's largest community development financial institutions.
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