By Sen. Elizabeth Warren for Credit.com
Student loan debt is exploding. It has grown so much and so fast that it not only crushes millions of young people, but it also has started to weigh down our entire economy. Total nationwide student debt now stands at $1.2 trillion, more than the total credit card debt owed by everyone in America.
In the coming days, the Senate is expected to vote on the Bank on Students Emergency Loan Refinancing Act, which would help ease this debt burden for millions of borrowers by cutting the interest rates on existing student loans. Earlier this summer, a large majority - 58 senators, including every Democrat, every Independent and three Republicans - were ready to take up the bill, but Republicans filibustered it, refusing to even debate the legislation. We may have lost that vote, but we're not ready to give up. More than 750,000 people have signed petitions in support of student loan refinancing, and momentum continues to grow.
Every Democrat, every Independent, and even three Republicans were willing to advance the Bank on Students Act because they recognized that we are facing a crisis. Federal agencies like the Federal Reserve, the Treasury Department and the Consumer Financial Protection Bureau are already sounding the alarm. Student debt is keeping borrowers from buying homes, moving out on their own, buying cars and opening small businesses. It's keeping them from making the purchases that will help our economy grow.
With interest rates near historic lows, homeowners, businesses and even local governments have refinanced their debts. But a graduate who took out an unsubsidized loan before July 1 of last year is locked into an interest rate of nearly 7%. Older loans run 8-9% and even higher. These higher interest rates are producing billions of dollars in profits for the government. According to the Government Accountability Office, just one slice of the loans - those from 2007 to 2012 - will produce $66 billion in profits.
Our bill lowers the rate to 3.86% for undergraduate loans and a little higher for graduate and parent loans. These new rates are exactly the rates nearly every Republican in the House and the Senate voted for just last year as the fair rate for new student loans issued in the 2013-2014 school year. If these lower rates are good enough for new borrowers, they should be good enough for the older borrowers, too.
Instead of running up the deficit, we propose to offset the lost profits from the higher student loans rates. By stitching up a loophole in our tax code that allows some millionaires to pay a lower tax rate than middle-class families, we can reduce loan rates for our kids and make sure that the wealthiest among us pay their fair share. In fact, closing these loopholes will fully cover the cost of refinancing student loans and will reduce the federal deficit by about $14 billion, according to the Congressional Budget Office.
This legislation doesn't solve every problem that we have in higher education. We need to bring down the cost of college, and we need more accountability for how schools spend federal dollars. But the need for more reforms shouldn't stop us from doing what we can to help the 40 million Americans with existing student loan debt right now.
This is a question of economics, but it is also a question of values. Should we continue to support millionaires and billionaires, carefully protecting the loopholes that let people earning more than a million dollars a year pay tax rates lower than middle class families? Or do we spend the same money to support young people who borrowed money to go to school?
Republicans so far have blocked the Bank on Students Act, choosing to side with billionaires instead of with students. But we're not backing down on this issue. This bill can pass if the Republicans would drop their filibuster - and if they continue their obstruction, we're still just two votes away from breaking that filibuster.
The billionaires may have an army of lobbyists to protect their perks, but we have our voices and our votes. We're going to keep fighting to level the playing field for students, strengthen our economy, and give everyone a fair shot at building a future - keep fighting until we make it happen.
This story is an Op/Ed contribution to Credit.com and does not necessarily represent the views of the company or its affiliates. Sen. Elizabeth Warren (D-Mass.) is a member of the Committee on Banking, Housing, and Urban Affairs. Previously she served as Special Advisor for the Consumer Financial Protection Bureau and was a professor at Harvard Law School. She is the author of "The Two-Income Trap: Why Middle-Class Mothers and Fathers Are Going Broke" and several other books.