Senate Democrats want to let people refinance their student-loan debt through the federal government, and they’re counting on voters paying attention to their efforts come November.
A proposal from Democratic Sen. Elizabeth Warren of Massachusetts would let Americans refinance federal and private student-loan debt at the same rates students can get for new loans.
Democratic leadership has pledged to bring the bill to the floor for a vote in the first or second week of June as the latest plank in the “Fair Shot Agenda,” their 2014-election year legislative plan that has already included minimum-wage and equal-pay legislation.
Of course, most Democrats actually like the policy proposals they’re pushing. But they also think they make for excellent politics and appeal to a broad swath of Americans, including the Democratic base they so desperately need to turn out in November.
“We think this is an issue that is timely, and it’s one that across America draws a reaction you don’t often see,” said Senate Majority Whip Dick Durbin said of the student-loan proposal. “Most of us have been around a lot of campaigns and a lot of issues over a long period of time. I cannot think of a single issue that draws such a spontaneous emotional response from every audience you speak to.”
Student-loan debt is a crushing weight on many Americans. It has already surpassed credit-card debt, and adds up to more than $1 trillion. And, according to a new Pew Research Center survey, it weighs heaviest on younger generations: 37 percent of households headed by someone younger than 40 has student-loan debt, which is a record high.
Addressing student loans polls well with young people. One-third of 18-to-30-year-olds “worry a lot” about high student-loan debt, and 87 percent favor lower interest rates, according to a new poll conducted by Harstad Strategic Research. But that doesn’t make this an immediate winning strategy, politically: Only 28 percent of those same millennials said they will “definitely vote” in the 2014 election.
Last year, Congress faced a doubling of interest rates on certain new student loans. But rather than extend the lower rates before they doubled, they restructured the way interest rates on new loans are calculated by tying them to a market instrument. Students taking out new Stafford student loans, for instance, pay 3.86 percent on undergraduate and 5.41 on graduate loans. Those rates are locked in for the life of the loan, but depending on market fluctuations, the rate can change for new loans from year to year.
Unlike last year, Congress doesn’t actually face a deadline to get something done regarding student-loan debt — so the impetus to act quickly just isn’t there.
And just like with minimum wage and the Paycheck Fairness Act that Democrats have pushed in recent months, this student-loan proposal is a long shot to actually passing the Senate, let alone reaching the president’s desk. It’ll need five Senate Republicans to back it, along with the entire Democratic caucus.
It’s being paid for using the so-called “Buffett Rule” tax on millionaires that ensures they are taxed at at least 30 percent (it does so by changing the maximum tax rate of 15 percent on long-term capital gains). The Congressional Budget Office hasn’t yet provided a score on how much the student-loan proposal costs, but Democrats say enacting the Buffett Rule would cover it fully.
Even before Warren’s proposal was introduced, the Senate’s No. 2 Republican shot it down. “This looks like a dusted-off proposal to raise taxes, and that’s not something I think we need to do,” Sen. John Cornyn of Texas said last week. “Our economy grew at 0.1 percent last quarter.”
Democratic leaders say they are open to Republican alternatives to pay for the plan, but that’s not really where the complete objection lies. Republicans are weary of the federal government getting into the business of refinancing such loans at all, including private loans.
Republican Sen. Lamar Alexander, the ranking member of the Senate Health, Education, Labor, and Pensions Committee, said in a statement that Warren’s proposal “is starting down the road of turning a trillion dollars of student loans into grants and counting spending in a way that the Congressional Budget Office has told Congress not to do.”
It’s also unclear whether Republicans will offer a specific alternative on refinancing student-loan debt; Alexander pointed to Republican proposals dealing with school choice, early-childhood learning, and changing the way college students can use Pell Grants.
Some of the lawmakers who had been instrumental in the student loan deal that was cut last summer said they either haven’t been approached yet about this proposal or are still thinking it over. And Warren and other liberal Democrats actually opposed that deal, saying the rates were too high and shouldn’t be tied to the market.
An Alexander spokesman says there hasn’t been outreach to the senator about the new bill. “There’ve been no hearings on the bill by the committee, there have been no markups, and the committee is in the middle of a bipartisan effort to reauthorize the Higher Education Act,” Jim Jeffries said. “It’s hard to see how this could be anything more than a messaging bill.”
Democratic Sen. Chuck Schumer of New York, a member of leadership, pushed back on the idea that a hearing is needed on this proposal: “We’ve been discussing student loans here for years. It’s a very simple concept; you don’t need a lot of hearings: Should the government be charging people 7 percent, when they can charge them 3 or 4 percent? Should banks be charging them 14 percent, when the going rate of interest is 3 or 4 percent?”
Schumer added, “The bottom line is, it’s not a messaging bill if they’ll support it.”