When interest rates go down, many people with outstanding loans — house, car, home equity — start looking around at refinancing options. Unless your debt is a student loan, in which case federal law places you in a different category from the rest of the borrowing public and sticks you with the original loan rate.
The Senate on Wednesday is expected to take up Massachusetts Democrat
In a related effort, President
Both measures are positive, justified steps to ease the financial pinch from student loans. It's a significant issue, propelled by three decades of stagnant family incomes while average tuition at a four-year public university tripled (problems that, unfortunately, neither of these measures address).
Today some 40 million people hold student loans totaling more than $1.1 trillion, a debt level larger than that of the nation's credit card holders. About $1 trillion of the outstanding student loans is owed to or guaranteed by the federal government, and an additional $100 billion or so was borrowed privately from banks. Those are big numbers. On a more digestible level, the Institute for College Access and Success estimates that 7 of 10 college seniors in 2012 had student loan debt, owing, on average, $29,400.
For years the federal government tied the interest rate to Treasury bills, but in 2006 fixed the rate for subsidized and unsubsidized need-based Stafford loans at 6.8%, then gradually lowered the subsidized loan rate to 3.4%. Rates for graduate student loans were higher.
To offset that, Warren wants to implement the so-called Buffett Rule, raising taxes on people earning more than $1 million a year. Whatever the merits of such a rule, it is likely to be a deal-killer in the Senate, where Republicans would be sure to filibuster it, and certain to go down in the House, where Republicans hold a majority and are committed to opposing new taxes.