Student Loan Refinance Bill Would Save Me Tens of Thousands of Dollars

This coming week, President Obama is said to be officially offering his support of a bill proposed by Senator Elizabeth Warren (D-MA). The Senator’s bill, as it is currently written, will elevate a lot of the financial burden to college graduates around the country who are currently in over $1.2 Trillion in debt due to the costs of their education. Private lenders are making Billions of dollars in profits as a result of student loans, and colleges have no incentives to lower the costs of tuition, and are actively raising the costs every year (because they can). This Student Loan Refinance Bill will save me thousands of dollars every year on my payments, and tens of thousands over the life of my loan.

Originally, the Obama administrations was hesitant to fully support this bill because of disagreements over how the government would actually be able to pay for it. You see, the bill allows former students who are currently burdened by the expensive repayment plans (myself included) to refinance all of their loans into a single loan with a much lower interest rate. In order to do this though, the government has to have the funds to purchase the loans from the current lenders, which means the government needs the funds to do it.

With a lot of pressure from various advocacy groups and a focus on working families, the president has shifted his position on the matter, and is recognizing the bill as a good idea for America’s future. Like usual, the president has looked at things in terms of what works best for the future, and while not all of his policies or plans are “the best” in everyone’s eyes, this one is a no-brainer. Helping students pay for student loans, not by financially supporting them, but simply by lowering the interest that they’re paying overall, will present graduates with more financial opportunities for investment, job growth, and most importantly, we’ll have more money to put into the economy with the purchase of goods and services.

Obama is set to call for the passage of the refinancing bill, but that doesn’t mean it’s going to work. One critical factor to consider when any bill comes out of the Democratic party, is the overwhelming and instantaneous denial and resistance that will come from the GOP. Regardless of how much good it will do, there’s always something they’ll come up with that will present a problem for America’s youth and working class. This time is no different.

Student groups and other organizations love and support Warren’s bill, under which new interest rates would range from 3.86 percent for loans taken out by borrowers when they were undergraduates to 6.41 percent for parents who took out loans for their children’s college tuition, as well as for borrowers who took out loans to pay for graduate school. Compare these rates to my loans, which are currently at 9.75%, 7.6% and the federal Department of Education loans that are locked at 6.25%. Reducing the interest rate in a refinance move would save me over $230/month in payments, and reduce my financial burden for college by almost $55,000 over the life of my loan (given the amount I owe).

Keep in mind, myself and other students aren’t asking for the government to bail us out (even though, in hind site to the others they’ve bailed out in the past, this is a much more worthy cause). Instead, we’re merely excited about not having to pay, in many cases, over $100,000 more than we borrowed for our education. We’re still going to pay interest… just not double our principal. That’s good for everyone… well, except the private banks and lenders who’s income is purely based on interest, screwing students like me over every month while keeping us oppressed into a struggling middle-class. Personally, I spent nearly 40% of my monthly income on student loans. I could, obviously, reduce this to 10% of my income, but if I was to do this, the interest rate I’m at would cause my debt to rise every month even when I’m making payments. I would essentially be stuck in endless debt. – and that’s what the financial industry wants.

The financial industry hates this proposal. The bill would allow borrowers to refinance loans owned by the private sector into new loans made by the Education Department. Paying off loans early deprives lenders of future interest income, causing paper losses. Effectively, if I’m allowed to refinance my private loan balances, which total over $35,000 as of this article, the private institutions that I currently owe at 9.75% APR would be missing out on tens of thousands of dollars in interest payments over the next 20 years. Clearly, they’re not in favor of that, and their Republican friends are going to try and make their real friends happy, rather than the American people.

Republicans are dead set against enacting the proposal into law. On top of the fact that income that was originally going to private companies is now being redirected into federal money (because the loans are federal loans, and therefore the interest is paid to the government instead of the private sector), the Democrats proposed to offset the loss of future federal revenue by increasing taxes on the extremely wealthy — an idea that is always frowned upon in conservative circles. What did we expect? Common sense over greed?

“This bill doesn’t make college more affordable, reduce the amount of money students will have to borrow, or do anything about the lack of jobs grads face in the Obama economy,” Senate Minority Leader Mitch McConnell (R-Ky.) said in a statement.

This is obviously wrong, as usual. By reducing my interest rates by more than half of what they are today, I’ll pay significantly less for my education on a per month basis, which carries over to an even bigger effect in the long-term, because of how compound interest works. It absolutely makes college more affordable, because it reduces the cost of education. Simple as that. On top of that, while it doesn’t ‘reduce the amount students will have to borrow’, it does reduce the amount they’ll have to pay in the end, with reduced interest rates.

How would they like it if I claimed that raising taxes wouldn’t effect how much money you earn in your business, but it would effect how much you have to pay every year. – It’s exactly the same thing, and it’s the exact reason you fight tax increases every year. The difference here is simple: you like keeping us in debt. The more debt we’re in, the more money banks will make, and the more money they’ll continue to funnel into your campaigns when you vote the way they want you to, so the cycle will continue.

student debt ruin america

Republicans will make me and millions of other American’s suffer financial turmoil further simply because some Billionaires don’t want to miss out on a couple million dollars over a few decades. The lack of Republican support means the proposal would be unlikely to garner the 60 votes needed to prevent a filibuster in the Senate or pass the GOP-controlled House of Representatives.

If you value education in this country, and wish to allow the economy to recover further by reducing the financial burden on the working class, and for those who are doing everything they can to further their education and make something of themselves in the American dream… then you will support this bill. Anyone who doesn’t needs to be voted out of office as soon as possible. Every GOP politician who suppresses citizens for the sake of bankers, needs to be removed from government entirely.

Pass this bill, and support struggling graduates like me. Share this post and raise awareness if you care.

Charlie Pryor

Charlie is a media producer, writer, and a traveler. He grew up in Michigan, all of his life and attended Grand Valley State University for a B.S. in Film and Video Production. He's married to a wonderful woman named Hang, and simply hopes to one day turn himself into a man that many will remember long after he's gone.

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6 Responses

  1. Alex Martin says:

    Another government shortcoming… Student loans should be completely privatized. If student debt could still maintain a nondischargeable status even for private lenders there would be no reason that rates could not be roughly that of the prime rate.

  2. Charlie Pryor says:

    No way. Private companies have proven time and time again that they care more about profit than enabling students to succeed and contribute to society and the economy. Any institution that values profit, and will raise rates at any chance they get, isn’t a good candidate for lending to students.
    The opposite is true. Student loans should be subsidized and lenses through an organization that has the lowest possible rates. Private lenders don’t even try to compete. They know they don’t have to. – that’s not the nature of a market economy. That’s the nature of a rigged system against students.
    This does a bit to rectify that.

  3. Alex Martin says:

    A loan should be profitable, isn’t that the entire point in making a loan? By allowing the rates to float with that of prime however it will create competition for the loans in the market which will create competitive rates.
    Student loans rates are dictated by the government and are twice that of the prime rate, my mortgage is based on prime and is below 3%.

  4. Charlie Pryor says:

    “By allowing rates to float at…” Stop right there. Private loan rates are 2-3 times that of the loans provided by the Department of Education, and are subject to rate increases for any reason the lender sees fit. This is not a competitive market. It’s a “you’re trapped” market.
    This bill is about giving millions of struggling students with over $1.2 trillion of debt a way to reduce the burdens of their loans. It isn’t going to pay anything off for them. It’s not some government buyout. – it’s an interest rate reduction.
    If my private lenders would reduce my interest rate when I’ve been making great payments on time and have great credit, I would be fine staying with them.
    But the opposite is true. My loan APR is nearly 10% with private, much higher than the DoE.
    Any way you cut this, this helps the country, helps the economy, and helps graduates become more contributing parts of society and further fuels their abilities to take investment risks, make jobs, and create new innovations.
    The only people it hurts, are big banks. Boo hoo Republicans

  5. Alex Martin says:

    The current private loan rates reflect the terms that are allowed them. Like I said before, if the same loan terms were given for private student debt it would be competitive.
    This bill should have never came to be simple due to the fact that the rates should have never been allowed at what they are today. Today’s rates are based on a prime rate a decade ago, loan rates should move with prime instead of being set by congress.
    I also do not understand how this is a republican or demo issue…Do you truly believe that every republican has ties to some bank and no democrat does?

  6. Charlie Pryor says:

    To the end question, the answer is simple: one party is unanimously supporting it, and one is mostly against it. – the one against it is getting the blame. Simple as that.
    Saying this shouldn’t be allowed to happen because it shouldn’t have been needed in the first place, isn’t productive. It isn’t as it should be… That’s the point. There are no prime rate, competitive rate, blah blah. It’s banks keeping rates as high as possible, rather than helping as many people as possible.
    One organizational body wants to help people. One wants to profit. – I will always support those looking to help people over profit.
    In theory, the private system should be competitive and make the best rates. – in practice today, it isn’t, thus, the need for the bill.
    Am I saying your way of thinking is wrong? No. It’s probably right… But the situation in which it is right, isn’t reality. It isn’t as it should be, and thus, the way to fix it isn’t either

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