WASHINGTON (5/21/13)--Sen. Kirsten Gillibrand (D-N.Y.) is the latest member of the U.S. Congress to take on student loan issues, announcing a new bill, the Federal Student Loan Refinancing Act, over the weekend.
Gillibrand's bill would enable federal student loan holders with interest rates above 4% to refinance those loans at a fixed rate of 4%. The senator in a release said her bill would reduce interest rates for nine of 10 student loans nationwide.
"The nation's $1.1 trillion in student loan debt is contributing to sluggish economic growth, negatively impacting young borrowers' purchasing power, home and car ownership, and even small business growth and entrepreneurship.
Keeping interest rates low would help reduce the debt burden on students and strengthen their purchasing power to boost economic growth," Gillibrand said.
The senator said she would also support another recent piece of student loan legislation: the Student Loan Affordability Act. That bill, introduced last week by Senate Majority Leader Harry Reid (D-Nev.) and Sens. Tom Harkin (D-Iowa), Patty Murray (D-Wash.) and Jack Reed (D-R.I.), would cap federal student loan rates at 3.4% for another two years.
The federal student loan rate is scheduled to double from 3.4% to 6.8% on July 1 if Congress does not take action.
Other student lending solutions have been introduced in the House and Senate. Sen. Elizabeth Warren (D-Mass.) introduced a bill, the Bank on Students Loan Fairness Act, which would offer federal student loans at the same rates that are charged to banks through the Federal Reserve discount window. That rate is currently 0.75%.
Rep. Karen Bass (D-Calif.) in March introduced her own bill that would cap federal student loan interest rates at 3.4% and also allow some borrowers to refinance their student loan debt to improve their rate.
The Credit Union National Association's first annual High School Student Borrowing Survey, released last month, found that nearly half of high school seniors don't know how much they will need for college costs. That lack of knowledge translates to a greater student-debt burden after college.
In a recent meeting with Consumer Financial Protection Bureau officials, CUNA said credit unions could do more to help debt-saddled grads if the maximum credit union student loan maturity of 15 years was increased. (Use the resource link for an April 23 News Now story: CFPB Seeks CU Help For Student Loan Issues.)