U.S. Senator Tammy Baldwin helped reintroduce the Bank on Students Emergency Loan Refinancing Act, which would allow borrowers with existing public or private loans from 2017-2018 to refinance those loans to a 3.76 percent annual interest rate.
According to a press release Baldwin sent on March 19, the 3.76 percent rate was previously offered in 2016-2017. Outside of public or private loans, graduate school loans could be refinanced to 5.41 percent, and parent loans for a child’s education could be refinanced to 6.41 percent.
“Higher education should be a path to prosperity, not suffocating debt. Right now, student loan debt is holding back an entire generation and creating a drag on economic growth in Wisconsin and across the country,” Baldwin said. “This legislation will help bring relief to Wisconsin students and families by ensuring they can refinance their loans and pursue a repayment plan that works for them.”
Assistant Director of the UW Oshkosh Financial Aid Office Karen Kennedy said not everyone is eligible to refinance under the act, and some people may not want to.
“I don’t really have any feelings about it because you have to be careful as a consumer,” Kennedy said. “If you refinance at a lower interest rate, that might be better for you, but you may lose some of the borrow benefits.”
Kennedy said it’s complicated because the department of education has other programs for people that can’t pay their full payments.
“They have things like the standard repayment plan, graduated repayment plan, pay as you go, those kind of things,” Kennedy said. “Would all these loans still be eligible for that? So it’s kind of like you don’t know who it would really benefit.”
Kennedy said she has seen an increase in interest rates over the last several years.
“I think it was down about 3.4 somewhere around 2012, 2013,” Kennedy said. “So those interest rates have climbed, and it’s currently like 5.05 for undergraduates.”
Kennedy said she doesn’t believe the bill will pass due to lack of support.
“Everybody’s talking about it,” Kennedy said. “But the only provision for me in debt relief is to give more gift aid, which is Pell Grants, supplemental grants, make more people eligible. That would drastically cut loan debt. So if you don’t have to borrow so much to go to school, that’s a better thing.”
According to estimates from the Department of Education, about 25 million borrowers would be likely to refinance under this legislation, and borrowers would receive an average savings of $2,000 over the life of their loan.
According to the press release, the bill is led by senator Elizabeth Warren (D-MA) and representative Joe Courtney (D-CT).
“The student debt crisis is real for millions of Americans, and our current student loan system is deeply unfair to borrowers,” Warren said. “This legislation has always been about basic fairness: people should be able to lower their federal student loan interest rates and reduce their debt burdens like they can with a mortgage, car loan, or other consumer loans.”