NEW YORK (MainStreet) — Senator Elizabeth Warren (D-Mass.) is back on the barricades with a re-do of last year's legislation that will let people refinance their student loans.
She has company, with Generation Progress and the Center for American Progress joining the fray. She also faces a Republican-controlled Congress.
“Student loans continue to be a drag on economic growth," said David Bergeron, vice president for post-secondary education at the Center for American Progress. "Senator Warren’s bill, reintroduced today, would go a long way toward addressing the needs of the millions of Americans who are struggling to repay their student loans by lowering their interest rates and consolidating to a single payment. This will leave borrowers with more money available to buy a home, start a family, or invest in entrepreneurship.”
“For too many of America’s young people, pursuing a college education has become a one-way ticket to a lifetime of student loan debt,” said Senator Dick Durbin (D-Ill.). “Giving student loan borrowers the option to opt into a lower interest rate by allowing them to refinance their loans will be a financial relief to millions of families in Illinois and America. I am happy to join Senator Warren on this important issue.”
Warren's bill is thought to be identical to a House bill introduced by Representative Joe Courtney (D-Conn.). Both bills are similar to the Senate bill from the previous Congress, but include loans covered through June 20, 2015.
Mark Kantrowitz, senior vice president and publisher of Edvisors.com, doesn’t like the Warren bill’s chances.
”The bill does not appear to have bipartisan support,” he said. “It is unlikely to pass in a Republican-controlled Congress, especially since it still includes the Buffett Rule." The Buffet Rule was part of the 2011 Obama tax plan that would slap a minimum tax rate of 30% on individuals making over $1 million.
Student loans continue to be the nagging back story nearly everywhere in higher ed. Pell Grants have interacted with them in an increasingly critical way, and the GOP's budget has Pell Grants in its cross-hairs.
"The real problem with student loans is the amount of debt, not the cost of the debt," said Kantrowitz. “Government grants have not been keeping pace with increases in college costs. Federal and state governments have been cutting their support of postsecondary education on a per-student, constant dollar basis for decades.”
This shifts the burden of paying for college from the government to the families, Kantrowitz noted.
“Since family income has been flat, this forces students to graduate with thousands of dollars of additional debt or to enroll in lower-cost colleges," he said. "The shift in enrollment from four-year colleges to two-year colleges has caused a decline in bachelor’s degree attainment, especially among low- and moderate-income students. We are increasingly pricing low income students out of a college education.”
Kantrowitz argued for a three-fold increase in the average Pell Grant rather than an interest rate reduction, which he said would be more costly.
"Congress could set the maximum Federal Pell Grant at $15,000, indexed to 1% over CPI-U (the Consumer Price Index for Urban Consumers), with an eligibility cutoff at 250% of the poverty line," Kantrowitz said. "Increasing grants reduces the need for debt and leads to improvements in college graduation rates."
But freezing the maximum Federal Pell Grant for a decade, as has been proposed in the Republican budget blueprint, would cause the buying power of the Federal Pell Grant to drop almost in half at the end of the ten-year period, according to Kantrowitz.
“The Federal Pell Grant would be worth less than a quarter of what it was worth when the program began in the 1970s," he said.
--Written by John Sandman for MainStreet