Wall Street Warns of 'Headline Risk' From Elizabeth Warren Student Loan Bill
The "Bank on Students Emergency Loan Refinancing Act" would allow borrowers with outstanding student loans to refinance them at a lower rate. Funding for the measure would come from passage of the so-called Buffett Rule, which would raise taxes on individuals and families earning more than $1 million.
The Buffett rule failed to pass the Senate in 2012, as did a student loan reform proposalfrom Sen. Kirsten Gillibrand (D., NY), which is why Janney Capital Markets analyst Sameer Gokhale believes "the proposal is unlikely to be enacted into law," according to a report he published Wednesday on private student lender Sallie Mae SLM.
Still, Gokhale added that he sees continued "headline risk," from the proposal. He reckons if it were to pass it could reduce Sallie Mae earnings by roughly $0.13 per share annually while also putting pressure on new interest rates for private loans.
Another analyst using the phrase "headline risk," was KBW Washington analyst Brian Gardner in a report published late Tuesday.
Gardner deemed Warren's plan "DOA," but added "if some alternative offset could be found then the bill may have a chance of passing but in the current political environment we think such a scenario is unlikely."