By Peter Schroeder - 05/06/14 12:12 PM EDT
Senate Democrats are looking to provide relief on student loans as part of their legislative push for the midterm elections.
Twenty-three Democrats unveiled a measure Tuesday that would allow borrowers to refinance their student loan debt to take advantage of lower interest rates. It would cover the costs by implementing the “Buffett Rule,” which would raise taxes on the wealthy to ensure they pay the same rate as the middle class.
“Exploding student loan debt is crushing young people and dragging down our economy,” she said in a statement. “Allowing students to refinance their loans would put money back in the pockets of people who invested in their education.”
The measure enjoys broad support from Democrats, pulling in liberals like Warren as well as centrists such as Sens. Heidi Heitkamp (N.D.) and Mary Landrieu (La.). It also enjoys the support of top Democrats, like Majority Whip Dick Durbin (Ill.) and Senate Budget Committee Chairwoman Patty Murray (Wash.).
The Democratic unity behind the bill comes after many left-leaning members of the party split over student loan legislation enacted in 2013.
That measure tied rates on new loans to financial market fluctuations, and several Democrats opposed the plan, calling for lower fixed rates instead.
The new measure could nearly halve the interest rates on student loans for some borrowers. Democrats noted that many borrowers are paying off outstanding loans with rates around seven percent, and the bill would let them refinance at rates for new loans, which stand at 3.86 percent currently.
Furthermore, borrowers who have private student loans would be able to refinance into the federal program.
Given that the legislation hinges on hiking tax revenue, it is unlikely to gain any bipartisan traction. Instead, it likely will serve as another messaging tool for Democrats heading into the midterm election, as the party battles to retain control of the Senate.
Growing student loan debt, which now stands over $1 trillion and has surpassed credit card debt as the largest source of consumer debt, has becoming a growing rallying cry for Democrats. Warren noted when she unveiled the legislation that one in seven borrowers default on their loans within three years of beginning repayment, and the government is poised to make $66 billion on borrowers who have government loans.