What Elizabeth Warren’s new bill could have done for you
Last week, Massachusetts Senator Elizabeth Warren introduced a new bill that would have had a dramatic impact on student loans in America.
Warren’s bill, the Bank on Students Emergency Loan Refinancing Act, focused on the monthly payments that students make to pay off their loans. Last year, Congress passed a law that linked the interest rate on federal student loans to treasury bonds, reducing the interest rate from 6.8% to 3.86%. This bill only affected new loans being taken out, and didn’t help students who already were struggling with debt. Warren’s bill allowed students with older federal student loans to refinance—to renegotiate their loan and reduce the interest rate on their monthly payments.
This means the government would be making considerably less money off of students—$55.6 billion less in the first year, according to the Congressional Budget Office study. To make up for this shortfall, Warren planned on paying for this refinancing through the Buffet Rule, which increases taxes for the highest-income Americans. If the Buffet Rule generates surplus revenue, then Warren’s bill ensured that federal student loan interest rates would lower even more.
Sounds great, right? Well, the Buffet Rule is notoriously unpopular among conservatives in Congress, and the bill had no Republican support. So it wasn’t a huge surprise on Wednesday when the bill was voted down in the Senate.
The bottom line? Refinancing student loans is an important step for student borrowers, but it doesn’t address the root of the problem. If Congress is serious about helping students struggling with debt, then they need to address the high costs of college in America, not just how students pay that debt off.