U.S. Senator Debbie Stabenow today welcomed the announcement by President Obama that he will use his executive authority to help make student loans more affordable and easier to manage. Stabenow is the co-author of the Bank on Students Emergency Loan Refinancing Act, which would allow people to refinance their existing loans, taken out at higher interest rates in the past, at the lower rates available to new borrowers during the 2013-2014 school year, saving them hundreds or thousands of dollars. The Department of Education estimates that the legislation would benefit more than 25 million borrowers nationwide, including 963,000 in Michigan. The Senate is scheduled to vote on her legislation this week.
"I'm glad that President Obama recognizes that Americans need degrees, not debt, and has taken action to help millions of student loan borrowers," said Stabenow. "Too many people in Michigan face decades of paying down enormous debt just because they wanted a fair shot to go to college and get ahead. Now, the Senate needs to act to pass our legislation to lower borrowers' interest rates and help boost our economy."
Today's announcement would expand the existing Pay As You Earn program, which caps a borrower's monthly student loan payments at 10 percent of their income, to an additional five million borrowers who took out loans before 2007 or have not borrowed since 2011. The president also announced several steps the Departments of Education and the Treasury will take in cooperation with the private and non-profit sectors to help borrowers manage their student loans.
According to the Project on Student Debt, Michigan ranks in the top ten of states with the highest average student loan debt. In Michigan, the average student loan debt among those who borrow to get a bachelor's degree is nearly $29,000 and 62% of Michigan students have debt when they graduate. Many borrowers are stuck with unsustainable levels of student debt for two and even three decades of their lives.
Under the Bank on Students Emergency Loan Refinancing Act, a borrower with $29,000 in public loans at a 7 percent interest rate would save over $5,400 in interest payments over ten years. A borrower with $100,000 in private loans at a 14 percent interest rate would save nearly $155,000 in interest payments over twenty years.
The legislation has been endorsed by dozens of organizations, including the AFL-CIO, American Federation of Teachers, Center for Responsible Lending, Center for American Progress, the National Education Association (NEA), Service Employees International Union (SEIU), Young Invincibles, and many others.
The legislation is fully funded by enacting the Buffett Rule, which would limit special tax breaks for the wealthiest Americans that allow millionaires and billionaires to pay lower effective tax rates than middle class families, and will reduce the deficit by billions of dollars.