Sen. Elizabeth Warren (D-Mass.) has some advice for new college graduates with student loans: Choose your repayment plan wisely.
To Warren, it’s simply a question of fairness.
“Existing borrowers did exactly the same thing new borrowers are doing; they invested in getting an education, so why should they be treated any differently?” Warren said in an interview. “So if we can start with that premise that everyone should be treated the same whether you are a new borrower this year or an existing borrower who’s refinancing.”
Congress passed a bill last summer that fixed the interest rates for undergraduate federal student loans at 3.86 percent, with a slightly higher rate for graduate degrees and parents who borrow for their children’s education. However, those rates only apply to new loans, leaving those with outstanding student loans stuck in their current rates.
(Those existing borrowers include about 40 members of Congress who claimed student loan payments on their financial disclosures in 2012, according to the Center for Responsive Politics.)
“Everybody who has a home mortgage has refinanced at today’s low interest rates,” Warren said. “People who have small-business loans have refinanced at today’s low interest rates, even municipalities have refinanced at today’s low interest rates. The only ones who can't do that are students."
Warren said that by reducing the interest rate, payments would be more manageable.
“This is a way to keep more people in good standing financially and to help them build a future,” she said.
A new poll of 2,004 millennials ages 18-31 conducted by Harstad Strategic Research for Youth Engagement Fund and Project New America shows that more than half of millennials are worried about repaying their student loan debt.
Asked to rate their concern on a scale from one to five, 31 percent gave high student loan debt a “5,” 17 percent rated debt a “4” and 18 percent rated it a “3.”
As a campaign issue, lowering the interest rate on student loan debt cuts across party lines, with 87 percent of Democrats and 84 percent of Republican millennials in favor.
Warren, who is frequently mentioned as a 2016 contender, said that over the past eight years, more students are taking on more debt – an average increase of 70 percent from 2004 to 2012.
“The student loan debt is crushing our young people: At the moment they are beginning their economic lives, debt is dragging them backwards,” she said. “Young people can’t move out of their parents' homes, can't save for a down payment, can’t buy a home, can’t buy cars, can’t save to build an economic future for themselves.”
Her bill has 31 co-sponsors in the Senate, but no Republicans have signed on.
Warren isn’t the only member of Congress working to address the exploding student loan debt. Republican Marco Rubio (Fla.) introduced a bill last month to create an alternative to student loans through “a legal framework,” where students could agree to pay for a loan from an individual or private organization in exchange for a portion of their future salary for a set amount of time.
While Warren’s bill pays for the lowered interest rate through the Buffett Rule – which would increase taxes on all individuals earning $1 million or more by closing a tax loophole – she said she was open to any ideas Republicans may have to pay for the bill. “We just have to start with the premise about what we are trying to accomplish, that current borrowers and past borrowers were paying the same rate,” she said.
Warren’s proposal is a part of a series of Democratic-backed policies aimed at kitchen-table issues ahead of the mid-term elections, and is expected to see a vote on the Senate floor in early June.