Hats off to the Huffington Post for launching its new Black Voices and recognizing the value of expanding participation in the public sphere. This platform will allow policymakers and others to reach audiences that rely more on digital sources. As such, I would like to take this opportunity to address an issue that is of critical concern to young professionals in my district in Brooklyn.
As a Member of Congress, constituent feedback is extremely important to me. Not too long ago, a constituent of mine, a young attorney from Brooklyn, contacted my office to ask whether there were any loan forgiveness programs through the federal government available for private student loans. He claimed that the entire cost of his higher education -- both undergraduate and law school -- was covered by private loans. He said that though his passion was in public interest work, he now has to work at a big law firm to pay back all of his debt. My staff person asked him whether any of his loans were provided under the federal student loan program, and he said that they were not. He indicated he was ineligible because he went to private school for undergrad and law school.
Unfortunately for my constituent, he had been misinformed, likely by the student loan counselor at his school. Sadly, he is not alone. A recent study by the Project on Student Debt demonstrated that two-thirds of private student loan borrowers borrowed less than they could have in the federal Stafford loan program. Over one-fourth bypassed the federal student loan programs all together.
Federal loans are significantly more flexible, offer forgiveness programs and deferment options that many private loans do not, and are discharged in the event of death or severe disability. In fact, according to Student Lending Analytics, the average starting rates on private student loans is 9.5-10 percent. Federal loans have a low, fixed interest rate of 6.8 percent. Private loans generally have variable rates with no cap on the amount of interest that can be charged. Some borrowers pay rates similar to that of credit cards -- 18 percent or higher.
Young professionals in my district and across the nation are heavily burdened by student debt. At a time when our economy is in dire need of highly trained individuals, we need to do all that we can to encourage students to pursue degrees. The threat of debt carried throughout an individual's life and beyond should not be a hindrance.
As a result of the conversation with my constituent, I recently re-introduced the College Debt Swap Act, HR 2410. This bill would enable borrowers with high-cost private loans to use their remaining federal student loan eligibility to pay off or pay down the private student loan debt. By swapping expensive private loan debt into borrower-friendly, low-cost federal student loans, these individuals would be better able to manage their finances and repay their educational loans. For example, a working or middle class borrower with $8,000 in private loans would cut their average interest rate in half and save over $2,000 in interest payments over the life of a typical student loan.
Not only is this a win for students -- but it is also a win for taxpayers. In a time of financial difficulty, this bill relieves both students and taxpayers by shifting interest that would have gone to the private sector back to taxpayers. The non-partisan Congressional Budget Office has estimated that this bill will generate $10 billion over 2 years -- a substantial savings to students and the nation.