Democratic Senator Elizabeth Warren brought the “Bank on Students Emergency Loan Refinancing Act” to the table this month. The act would have made federal student loans cheaper by allowing students to refinance their debt at current lending rates. But last Friday, the Senate voted 56-38 against the bill, falling short of the 60 votes needed to beat a Republican filibuster and take the legislation to the next stage.
Senator Warren’s proposal would have allowed students to refinance loans at an interest rate of about 3.86 percent, the rate at which new students can take out loans under the Bipartisan Student Loan Certainty Act. This is much lower than the 7 percent or higher interest rate that students have been paying since the 2000s. Senator Warren proposed that the financial burden of refinancing the federal student loans should be borne by wealthy households earning more than $1 million per year.
Apart from the fact that the proposal demands wealthy taxpayers to pick up the tab for refinancing student loans, Republicans happily disagreed with the bill on the grounds that it did not address the core problem, which is outsized tuition costs. The rise in tuition costs has been exponential and according to them, reducing the cost of borrowing will hardly help reduce the overall size of student debt, which has been tearing through the roof since 2007.
The number of student borrowers has increased by 70 percent between 2004 and 2012, and the size of borrowing per person has also gone up by 70 percent, Federal Reserve Bank of New York data shows. The data show that an average borrower now owes about $30,000. According to Bloomberg, tuition costs are up 535 percent since 1985, way above the overall increase in inflation of about 121 percent.