Schumer Pushes New Legislation That Would Allow Borrowers to Refinance Debt at Same Low Rates Offered to New Undergraduate Borrowers - 3.86%
Uniondale, NY - May 12, 2014 - U.S. Senator Charles E. Schumer today, standing at Hofstra University alongside young professionals on Long Island burdened with student loan debt, pushed a new plan in the Senate that would allow young professionals with outstanding student loan debt to refinance at the lower interest rates currently offered to new borrowers. Schumer outlined part of the Senate Democrats new plan to give students a ‘Fair Shot’ at an affordable college education, by allowing borrowers that have undergraduate direct student loan interest rates of almost 7 percent or higher to refinance at today’s lower rates of 3.86 percent.
Schumer highlighted that under the Bipartisan Student Loan Certainty Act of 2013, students that take out new undergraduate loans for the 2013-2014 school year will pay a rate of 3.86 percent. However, this does not assist the thousands of Long Island young professionals saddled with an average of $30,000 in student loan debt that took out loans earlier than 2013 and are paying nearly 7 percent or higher for undergraduate student loans. However, under the Bipartisan Student Loan Certainty Act, students taking out new undergraduate loans pay a rate of 3.86 percent. Schumer today announced his push for new legislation, which will allow students and young professionals to pay back their outstanding loans at the same rates as new borrowers.
“High interest rates on student loans are creating an anchor around the necks of our young professionals on Long Island as they graduate and enter the workforce, and I am pushing a plan that will aid those individuals drowning in debt. This new legislation will allow borrowers of older loans, with interest rates at nearly 7% to refinance their debt at the lower rates of today, so that they can look to the future and eventually save for a car, a home or even retirement,” said Schumer. “All Americans deserve access to a good education but with skyrocketing student loan debt, plus exorbitant interest rates on top of that, college grads are struggling to make ends meet. Our young men and women deserve a fair shot at an affordable education and this bill will give them some much needed relief.”
"A college education is a pre-requisite to success in many careers. Unfortunately, the student loans that many must incur to obtain a degree can be crushing and unsustainable, impacting the lives of graduates for years or even decades after graduation, affecting their credit, housing options, and ability to get a mortgage. Students with large amounts of debt may be unable to obtain a mortgage, and with few affordable housing options on Long Island, many end up living with their parents well into their thirties. This problem is aggravated by the fact that graduates often remain locked into high interest rates for the life of a loan, regardless of prevailing rates, and lack the opportunity to reduce these costs through re-financing. LIincs is pleased to support improving the affordability of student loans for Long Island's young professionals,” said Lou Imbroto, President, LI Incs.
"Long Island facing a looming crisis. We are pricing out educated young people who grew up in this region- and one of the major hindrances towards home ownership and socioeconomic mobility is the massive student loan burden shouldered by a growing number of recent college graduates," said Suburban Millennial Institute Founder Jeff Guillot. "Senator Schumer's proposal is a common-sense reform that will lead to exactly the kind of economic flexibility that Suburban Millennials need in order to purchase a home and raise a family on Long Island."
There are nearly 40 million Americans with outstanding student loans; outstanding loan debt in America totals $1.2 trillion, which surpasses total credit card debt. The average student loan debt among those who borrow to get a bachelor’s degree is $24,900 – and 30% of Federal Direct student loan dollars are in default, forbearance, or deferment. One in seven borrowers defaults on federal student loans within three years of beginning repayment. Meanwhile, the Government Accountability Office (GAO) recently projected that the government will bring in $66 billion in revenue on its federal student loans made between 2007 and 2012.
Student loan debt can negatively impact the housing market. According to the Federal Reserve Bank of New York, two-thirds of student loans are held by individuals under the age of 40. Home ownership in that age group fell by 4.6 percent in the fourth quarter of 2012 from the third quarter of 2012; this is the biggest drop since 1982. According to a study titled, “Long Island’s Rental Housing Crisis,” an estimated 54 percent of Long Islanders between the ages of 25-29 live at home with their parents or relatives. Nationwide, 36 percent of individuals between 18-31 years old lived with their parents in 2012. This is the highest percentage in four decades.
According to the “Project on Student Debt—An Initiative of the Institute for College Access and Success,” the proportion of those in New York State with student loan debt is 60 percent. At Farmingdale State College, the proportion of 2012 graduates with debt is 43 percent. At Stony Brook University, the proportion of 2012 graduates with debt is 59 percent. At SUNY College at Old Westbury, the proportion of 2012 graduates with debt is 54 percent. At Adelphi University, the proportion of 2012 graduates with debt is 72 percent. At Hofstra University, the proportion of 2012 graduates with debt is 67 percent. At Molloy College, the proportion of 2012 graduates with debt is 77 percent.
Currently, borrowers with outstanding student loans can have interest rates of nearly seven percent or higher for undergraduate loans. Last year, the Bipartisan Student Loan Certainty Act set rates for new borrowers in the 2013-2014 school year, which allows them to pay a rate of 3.86 percent.
Schumer today pushed new legislation that will give student loan borrowers the opportunity to manage their debt by allowing them to refinance at the same low rates offered to this year’s borrowers in the student loan program. Under the legislation, all eligible federal FFELP and Direct student loan borrowers could refinance their high-interest loans down to rates offered to new federal borrowers in the 2013-2014 school year under the Bipartisan Student Loan Certainty Act.
Schumer today explained that the current student loan debt crisis poses serious dangers the nation’s economy. Schumer said that this legislation will give college grads the opportunity to save for the future without drowning in thousands of dollars in student loan debt.