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Most people with student loan debt are struggling with higher interest rates than mortgages and many other loans carry. And in most cases, refinancing isn't an option for student loan debt. Sen. Kirsten Gillibrand is seeking to change that, with a bill that would allow government-backed student loans to be lowered to a fixed rate of 4 percent, reducing the rates on an estimated 90 percent of federal student loans:
The Center for American Progress, a left-leaning policy and advocacy group, estimates that Gillibrand’s proposal in its first year would save borrowers about $14.5 billion off their student loan payments, boosting U.S. economic activity by $21.7 billion.
Gillibrand isn't the only Democrat looking for ways to ease the $1 trillion student debt burden; Sen. Elizabeth Warren has proposed giving students the same interest rates as big banks, among several other proposals. These proposals inevitably meet with "how are we going to pay for it?" objections from Republicans, and reporting on them goes along with that, presenting lowered student loan interest rates as a cost to taxpayers. That's because right now, student loan interest—paid by working- and middle-class people, people who couldn't afford to just write a check for the full cost of college tuition—is a significant revenue source:
Washington’s increased interest in student loan issues comes as the Education Department is forecast to generate a $51 billion profit this year from lending to college students and their families, a figure higher than the 2012 earnings of Exxon Mobil, the nation’s most profitable company, and roughly equal to the combined net income of the four largest U.S. banks by assets.
Reducing the interest rates on government-backed student loans is effectively a tax cut, in other words, but since it's a tax cut on the wrong kind of people (non-wealthy, non-corporate people), it's a tax cut Republicans don't like. So efforts to lower the student loan interest rate are always met by cries of "but how will we pay for it," as if tens of millions of recent graduates and their families weren't already paying for it. With interest rates again slated to double to 6.8 percent on July 1, something needs to be done to help students and recent graduates build their lives as adults without massive debts hanging over them, constraining the choices they can make about jobs, about taking risks, about starting families.