With student loan debt surpassing $1 trillion and New York graduates facing sky high student debt at an average of more than $27,000 per graduate, U.S. Senator Kirsten Gillibrand (D-NY), was joined today by New York City students, graduates, Campus Progress Director Anne Johnson and New York Public Interest Research Group's (NYPIRG) Higher Education Program Coordinator Kevin Stump, in announcing new legislation to reduce student debt on federal loans by allowing millions of graduates and borrowers currently repaying their federal student loans to refinance at a lower interest rate. This legislation would impact nearly 9 in 10 federal student loans nationwide. And with over 422,000 young New Yorkers in danger of an interest rate hike of 6.8 percent on their federal Stafford loans, Senator Gillibrand also announced her push for a bill that would stop the rate from doubling and freeze need-based student loan interest rates at 3.4 percent. The average New York student would have to pay an estimated $993 more in Stafford loans if Congress does not act by July 1st.
Graduates are facing a tougher time repaying their college loans as student debt nearly tripled since 2004, with New York graduates facing an average debt of $27,310 last year, according to the Federal Reserve Bank of NY. Over the past several years, more young borrowers have fallen behind on their student loan payments, according to a Federal Reserve Bank of New York report. The Department of Education cites nearly 11 percent of New York State graduates, or 24,800 borrowers, defaulted on their student loans between 2009 and 2012, or were more than 9 months delinquent on their payments. Senator Gillibrand proposed legislation that will help graduates currently in repayment.
"More city graduates and middle class families are burdened by student loans than ever before and are struggling to repay a higher amount of debt than ever before," said Senator Gillibrand. "Our young people should be able to refinance in the same way that our businesses and homeowners do. We must strengthen our middle class families instead of forcing New Yorkers deeper into debt. Keeping a high-quality education in New York affordable is the right thing to do."
"Student debt continues to rise and is impacting students and families here in New York and around the country," said Anne Johnson, Director of Campus Progress. "Senator Gillibrand's legislation will save current students from taking on unnecessary debt and will pass along the benefits of historically low interest rates to borrowers with federal student loans."
"In a time of high unemployment, tuition hikes, inflated textbook prices, and cuts to financial aid programs, New Yorkers are forced to turn to loans to pay for college. Students and recent graduates across New York State and across the country need some type of relief," said Kevin Stump, Higher Education Advocate with the New York Public Interest Research Group.
"The national call to increase the amount of college graduates we have in America to meet the growing demands of a 21st century workforce should be met with ample investment. Senator Gillibrand's initiative to help those with existing loans refinance for a lower rate is an important first step towards strengthening economic opportunity for those who have been victimized by burdensome student loan debt."
To address the burden faced by graduates struggling to repay their federal student loans, Gillibrand's legislation, also known as the Federal Student Loan Refinancing Act, would enable individuals who have an interest rate above 4 percent to refinance their federal loans at a lower, fixed interest rate of 4 percent. Here in New York City, the average debt of graduates with federal loans from the 2010-2011 school year is more than $20,000.
Since a majority of federal student debt is set at an interest rate higher than 6 percent, Senator Gillibrand's legislation would bring much needed relief to millions of New Yorkers, significantly impacting the vast majority of the 2.7 million borrowers in New York and the 37 million borrowers nationwide. Gillibrand's bill would lower the interest rates for nearly 9 in 10 federal student loans nationwide.
A Center for American Progress report reveals that refinancing would increase disposable income nationwide by an estimated $14.5 billion in the first year alone. Interest rates are at historic lows, with homeowners, corporations and localities refinancing their debts. However, students and families who take out loans to pay for higher education are getting left behind in the refinancing boom. Senator Gillibrand's legislation would provide these graduates with a six month window to reduce their rates on all federally-owned student loans.
Senator Gillibrand is also helping to lead the charge in the Senate on legislation, called the Student Loan Affordability Act, that would prevent the interest rate on Stafford loans from doubling to 6.8 percent in July. Subsidized Stafford loans, which are available to undergraduates based on financial need, make up more than a third of federal student aid. Here in New York, more than 422,000 students have borrowed funds through Stafford student loans. With a deadline for a rate hike looming, Senator Gillibrand is pushing for a Senate bill that is fully paid for and would freeze need-based student loan interest rates at 3.4 percent for two years while Congress works towards a long-term solution to slow the rapid accumulation of student-loan debt. The bill would be fully paid for by closing three egregious tax loopholes, including closing corporate offshore tax loopholes.
The nation's $1.1 trillion in student loan debt is contributing to sluggish economic growth, negatively impacting young borrowers' purchasing power, home and car ownership, and even small business growth and entrepreneurship. Keeping interest rates low would help reduce the debt burden on students and strengthen their purchasing power to boost economic growth.