By Tim Johnson
If homeowners and business owners can refinance their loans to take advantage of low interest rates, why not debt-saddled college graduates and their parents?
That's a question Rep. Peter Welch, D-Vt., said he gets a lot as he tours the state and hears complaints about college affordability, or inaffordability. His comment came at a brief news conference at the University of Vermont Wednesday morning to tout legislation he is co-sponsoring that would permit the refinancing of student loans.
The cost to the federal government over a decade would be about $51 billion, Welch said, but an accompanying tax-code change, called "the Buffet rule," would more than compensate for that revenue loss, bringing in $72 billion. A similar bill is being sponsored in the Senate by Sen. Elizabeth Warren, D-Mass.
Welch acknowledged that passage in the House of "H.R. 4582: Bank on Students Emergency Loan Refinancing Act," would be an "uphill" struggle, but emphasized the effort is worth it because of the dramatic savings it could bring. A college graduate with a total debt of $30,000 could save $4,000 in interest payments by refinancing, he said, and parents with $50,000 in educational debt, $3,500.
"That's real money," Welch said.
Student loans could be refinanced at 3.86 percent, which compares to the current federal student loan rate of 4.66 percent, and the 2006 rate of 6.8 percent.
"This is about relief," Welch said. "It's not about forgiveness."
The term "Buffett rule" derives from a comment by billionaire investor Warren Buffett that he should not be paying taxes at a lower rate than his secretary. The rule has been advocated by the White House but has encountered opposition in both the House and Senate and remains unimplemented.
Appearing with Welch in support of the legislation were UVM Provost David Rosowsky; Marie Johnson, UVM's director of student financial services; Scott Giles, president and CEO of the Vermont Student Assistance Corp.; Bethany Scalzo, a Montpelier resident who had run up $60,000 in debt by the time she earned her master's degree; and Aya Al-Namee, president of the UVM Student Government Association.
Scalzo said she's facing student-debt payments of $700 a month for the next 10 years, limiting her lifestyle choices and preventing her from pursuing a Ph.D.
Total student debt in Vermont is $2.5 billion, Welch said. That's a slice of the national total debt of $1.2 trillion.
Welch called the bill "urgent legislation" that would be one his top priorities when he returns to Washington.