It’s the time of year when commencement speeches filled with good cheer and optimism circulate the Internet. Yet one big issue makes this graduation season kind of a downer: student loan debt.
The amount of cash grads owe has tripled in the past eight years, and, having passed the $1 trillion mark in 2012, it only keeps swelling. Even Congress, which isn’t known for speedy action, is paying attention to the skyrocketing number. Last summer, members passed the Bipartisan Student Loan Certainty Act, which lowered the federal loan interest rate to 3.86 percent for undergraduates.
What about borrowers with outstanding debts who graduated prior to 2013? They still have to pay nearly 7 percent more, and Sen. Elizabeth Warren wants to change that.
The Massachusetts senator introduced the Bank on Students Emergency Loan Refinancing Act this month. If it passes in Congress in June, federal loans taken out before 2013 will be charged the newer (and lower) interest rates.
“Exploding student loan debt is crushing young people and dragging down our economy,” Warren said in a press release. “These students didn’t go to the mall and run up charges on a credit card.”
The bill is in its preliminary phase, but the main goal would be to let all federal borrowers refinance their debts. This would allow them to replace their existing charges with a loan with better terms.
“It’s not just a youth issue,” says Brian Stewart of Generation Progress, a national organization that promotes political and social advancement for young people. Along with Warren and groups such as Student Debt Crisis and Young Invincibles, Generation Progress has been pushing for solutions via the Higher Ed Not Debt campaign.
According to Stewart, more than half of student loan debt is held by people older than 30. “You start to hear parents and grandparents helping pay for college by taking out loans themselves and co-signing.” When young people delay buying homes and other investments because of excessive debt, the entire economy suffers.
Higher Ed Not Debt’s latest project, #ItsOurInterest, aims to spread awareness about the refinancing movement by asking people to record and submit their personal debt stories. Voters get to pick winners, who will receive $500 each. The prize may pale in comparison with the average college debt, which stands at $29,400, but telling these stories might be the empowerment borrowers need.
“You don’t want to sugarcoat things,” Stewart said. But not carrying a massive debt before your career even starts? Now that’ll give graduates a reason to “get excited to go out in the world.”
UPDATED June 11, 2014—10:30 a.m.
Today the Senate voted 56–38 against Warren’s bill, which fell short of the 60 votes it needed to move forward. The legislation would have allowed 25 million borrowers to refinance their debt at lower interest rates.
Though Obama signed an executive order capping monthly debt payments and backed Warren’s proposed legislation on Monday, the bill stirred up debate in the Senate. The refinancing would have raised taxes on Americans earning more than $1 million—through the Buffet Rule—to pay for the cost. Republicans argued that Warren’s bill wouldn’t have reduced education costs or cut back borrowing, calling it a political maneuver played in time for the midterm elections, in which Democrats may lose their Senate majority.
“The Senate Democrats’ bill isn’t really about students at all. It’s really all about Senate Democrats,” said Republican Minority Leader Mitch McConnell. “They want an issue to campaign on to save their own hides this November.”
“We’re not giving up,” said Warren at a press conference after the vote. The bill could have saved borrowers $2,000 each over the course of paying off their loans, according to the Obama administration.
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