Current and former college students dealing with crushing student debt have received some relief during the coronavirus crisis, but Congressman Joe Courtney said the federal government can do more.
Courtney has proposed a bill that would allow people to refinance their debt at historically low rates.
University of Connecticut rising junior Colleen Keller said she supports it.
“Given the realities of this pandemic we’ve got going on, I know friends that are scared to death about their futures and higher education,” Keller said.
However, Courtney has a new bill: the Bank on Students Coronavirus Emergency Loan Refinancing Act of 2020. It would allow college students and graduates to refinance their federal student loans at 2.7%, the current rate for students taking out new federal loans.
“To have the low-interest-rate environment that we’re in and to have student borrowers just completely shut out in terms of being able to take advantage of that, it just makes no sense from a policy standpoint,” Courtney said.
Courtney’s bill, co-sponsored by Senator Elizabeth Warren, would require the U.S. Department of Education to automatically refinance the interest rate to that lower number; some would have to apply for the refinancing, like people with private student loans.
“A borrower, let’s say, has $50,000 in debt and is carrying 6.8% interest which is not an uncommon scenario with seven years left on their term, the savings is about $8,000 left in their pocket, which you know, that’s real money,” Courtney said.
Relief in difficult financial times for people like Adam Dawidowicz of Windham who went to college and graduate school long ago and still has student debt.
“I’m going to look at repaying them just about the time I’m getting ready to retire,” he said.
Changing the terms of student loans would certainly impact banks that originated and processed them.
“Private student loans are performing well and set borrowers up for success with a repayment rate of approximately 97%. More than one in five federal student loan borrowers, on the other hand, are seriously delinquent. More attention should be given to implementing common-sense reforms to federal student loans to help students better understand the amount of federal debt they are responsible for repaying,” said Nick Simpson, senior vice president of the Consumer Bankers Association.
The Consumer Bankers Association is a national organization that represents national banks, which process many private student loans.
We reached out to the Connecticut Bankers Association for comment but have not yet heard back.