Student Loan Re-fi Bill? Wait Till Next (Fiscal) Year, At Least
NEW YORK (MainStreet) Dueling budgets released this month by Congressional Democrats and Republicans were dead on arrival in the House and Senate respectively, but they will likely have an influence on what eventually becomes law. The Democrats' plan was largely in response to the budget proposed by Rep. Paul Ryan (R-Wis.), chairman of the House Budget Committee for the 2015 fiscal year, which begins in October.
The Democratic budget drafted by Representative Chris Van Hollen of Maryland, ranking Democrat on the House Budget Committee, has a student loan debt refinancing plan penciled in along with expanded loan repayment options. But they can't lead to deficit increases, which must remain in check from either 2014 to 2019, or 2019 to 2024. Most observers thought that this budget has no shot in the Republican controlled House.
Meanwhile at a speech at Boston's Suffolk University Law School on Saturday, Senator Elizabeth Warren (D-Mass.) said she would introduce legislation that allows current borrowers to refinance their debt at interest rates offered to new borrowers in the federal student-loan program.
"A graduate student who took out an unsubsidized loan before July 1 of last year is locked into an interest rate of nearly 7%," Warren said. "Refinancing those old loans would lower the interest rate to 3.86% for undergraduate loans and lower the others accordingly."
Current rates are lower because of last summer's legislation that ties student-loan interest rates to the ten-year Treasury bill. Those rates are also likely to rise as the T-bill rates spike in a rising rate environment. The Warren bill's prospects are anyone's guess.
The Ryan budget would freeze Pell grants at their current maximum annual amount of $5,730 for the next ten years. The budget would also leave it to Congress to reauthorize a new Pell amount each year, eliminating the mandatory funding stream that currently funds part of the program--and eliminating the grant for part-time students.
The Ryan budget would scrap the in-school interest rate subsidy for undergraduate federal loans and would also trim the benefits of Pay As You Earn, the Obama administration's income-based repayment program.
The National Humanities Alliance, which advocates for humanities funding, urged its members Tuesday to sign a letter calling on lawmakers to reject the Ryan proposal.
Secretary of Education Arne Duncan, in his House testimony last week, noted that "discretionary funding for education, excluding Pell Grants, remains below its 2010 level."
--Written by John Sandman for MainStreet