Lowering Student Loan Debt

Since 2004, student loan debt has nearly tripled, with Federal Student Loan debt surpassing $1 trillion nationwide for the first time ever. According to the NY Federal Reserve, while most forms of consumer debt have fallen since 2008, student loan debt has grown, eclipsing both auto loan and credit card debt. Outside of mortgages, student loan debt is currently the largest form of consumer debt.

New York graduates alone face student debt levels of, on average, more than $27,000 per graduate. Nationally, two-thirds of those earning a four-year bachelor’s degree graduate with more than $25,000 in student loan debt; 10% owe more than $54,000.

U.S. Senator Kirsten Gillibrand feels strongly that higher education is the pathway to the American Dream, and because of the rising cost of higher education, more and more Americans are finding it out of reach. She is committed to working to ease the burden on the millions of Americans struggling with crushing student loan debt.

To accomplish this, Senator Gillibrand has introduced the Federal Student Loan Refinancing Act, which would allow student borrowers to refinance their student debt at a lower interest rate, just as business-owners and homeowners are able to do. Interest rates on government debt remain low—currently below 2 percent—yet interest rates on unsubsidized federal student loans remain up at 6.8 percent and expected to rise.

Specifically, Senator Gillibrand’s bill would enable individuals who have student loan interest rates over 4 percent to refinance at a fixed rate of 4 percent. It would also give the Education Secretary a six month window to lower the interest rates of all federally-owned loans, allowing individuals to save thousands of dollars. It’s estimated that the interest rates of 9 out of 10 federal student loans nationwide would be lowered by this legislation, saving nearly 37 million borrowers billions of dollars in annual interest payments.

For example, under the current system, a graduate with $26,000 in federal student loan debt who pays 6.8 percent in interest over twenty years, would pay more than $47,600 over the life of the loan – about $21,600 in interest. Under the Federal Student Loan Refinancing Act, this individual’s high interest rate would be lowered to 4 percent, saving her roughly $9,800 in interest payments.


(soure: Center For American Progress)

Senator Gillibrand’s bill will not only make higher education more accessible for all Americans, it would boost the economy by putting more money back into the pockets of our student borrowers. According to the Center For American Progress, the refinancing of federal student loan debt would lead to personal savings of $14.5 billion nationwide and a boost in economic activity of $21.7 billion in the first year alone.

Senator Gillibrand knows that our young college graduates' increasing burden of student loan debt is holding them back from buying homes, starting families, and saving money for their futures. The Federal Student Loan Refinancing Act would begin to ease this burden and provide a much-needed boost to our economy.