At $1.2 trillion (that's more than credit card or auto loan debt), student loan debt is one of the biggest issues of our day.
We know students and families across generations are struggling with their debt -- unable to afford their full payment, missing payments, or worse: dropping into default. High debt can also have serious impact on the economy: causing a generation of Americans to hold off starting a family, buying a house, or even saving for retirement.
We took a big step toward making student loans more affordable in 2010, cutting banks out of the equation and dispersing student loans directly from the federal government, which feature far more protections and safety net programs.
However, a recent CBO (Congressional Budget Office) report showed that the federal government is projected to make $182 billion over the next 10 years collecting student loan interest off the backs of graduates. That's because over time, interest rates on federal loans have fluctuated -- and despite today's low-interest rate economy, some students are still locked in at 6, 7, even 8 percent interest rates on their loans!
Yet -- at the same time, the government is loaning to banks at less than 1 percent.
That shows that we can do much, much better for students.
As a nation, and as students, parents, graduates, and families, we can't afford to bury students with high interest rates. We need to take action now.
That's why, earlier today, Senator Warren stood up for student borrowers on the Senate floor, proposing legislation to allow students with high-interest rate loans to refinance into current lower rates.
As is, federal loan rules don't let borrowers do that because high student loan interest rates will net the Treasury billions in profit.
We share Senator Warren's belief that this needs to change. The whole point of the student loan program is to give student an affordable education and help borrowers succeed -- not be a revenue stream for the government.
The bottom line is: Refinancing will allow millions of borrowers to take advantage of current low interest rates, and in doing so, will lower costs for millions of borrowers.
Some people say that we can't afford low interest rates for students. I say, how can we afford not to? According to the NY Federal Reserve, young adults are marooned by student debt. In 2012, 43 percent of 25-year-olds had student loan debt, up from 27 percent in 2004. Worse, the number of borrowers in distress is growing; the percentage of borrowers who were more than 90 days late in repayment has risen from 10 percent in 2004 to 17 percent in 2012.
Last summer, Congress lowered the federal student loan interest rate, but that rate only applied to NEW borrowers, leaving millions of federal student loan borrowers stranded with high interest rates.
That's why we're calling on students, parents, and stakeholders alike to join Senator Warren in standing up for students. Sign our petition of support here.