By Peter Schroeder - 06/04/14 01:41 PM EDT
A bill offered by Senate Democrats that would let borrowers refinance their student loans at a lower rate and cover the costs by enacting higher taxes on the rich, would fetch $22 billion for the federal government over the next decade.
The Congressional Budget Office determined Wednesday that the government would end up spending about $51 billion if it allowed borrowers to refinance their student loans, in the form of lower interest payments.
Senate Democrats hope to bring the measure up for a floor vote this month and held a pair of hearings Wednesday to highlight the problems many borrowers face under thousands of dollars of student loan debt. Total outstanding student loans have grown to be the largest form of consumer debt, and now exceed $1 trillion.
Democrats argue that allowing borrowers to refinance student loans to a lower rate, the way people currently can with car loans and mortgages, would free up funds that could be put to better use elsewhere in the economy.
“Passing that legislation would put more money in borrowers’ pockets, so they can make ends meet, so they can make a down payment on a house, so they can start new businesses and grow the economy,” said Senate Budget Committee Chairwoman Patty Murray (D-Wash.) at a hearing.
Democrats argue that Republicans should heartily back the bill, but the inclusion of the higher taxes via the “Buffett Rule” is likely to make it a nonstarter with the GOP. Democrats have said they are willing to work with Republicans to find another way to cover the costs of the bill, but the CBO’s analysis shows they would need to scrounge up $51 billion in cut spending or increased revenue to do that.
But even if Democrats fail to garner GOP support for the measure, the legislation fits within the populist message the party is pushing hard ahead of the midterm elections. Hammering on a student loan relief message also speaks to younger voters, whom Democrats hope to mobilize for the midterms, as they fight to keep control of the Senate.
“Excessive student debt can defer or destroy the dreams of prospective first-time homebuyers, small business formation and entrepreneurship, and limit the options of young graduates who might work as teachers or doctors in rural areas,” said Sen. Sherrod Brown (D-Ohio), who chaired a separate Senate Banking subcommittee hearing on student loans Wednesday.