Senator Elizabeth Warren (D-Mass.) introduced a student loan bill on Tuesday that, while a long shot, is a marked shift toward the center from her previous proposals.
The bill would let people with federal student loans refinance them at 3.86 percent, the interest rate current borrowers pay. It would be funded by tax increases on the wealthiest Americans.
While the bill is unlikely to garner support from Republicans who tend to oppose more taxes, less than a year ago, the senator championed a bill that would have reduced student loan interest rates to .75 percent, about what big banks pay to borrow money.
That proposal drew enthusiastic support from students but never stood a chance of getting through Congress.
“I think a lot of folks introduce bills that are messaging bills,” said Sarah Lewis, the AFL-CIO’s senior lead researcher for policy and a member of the Warren-supported Higher Ed, Not Debt coalition. “They’re a way of saying to their base and stakeholders, ‘Something is just completely ridiculous.’ But ultimately that bill, it wouldn’t have passed.”
But Alan Collinge, founder of StudentLoanjustice.org, says that while he supports refinancing, this bill “falls far short of restoring much-needed consumer protections that should not have been taken away.”
“It’s not a game-changer,” he said.
Still, when it comes to lawmakers, Warren is as good as it gets for students looking for better interest rates and more protections.
And, as Lewis pointed out, “The fun part about D.C. is that when you want something to pass, you need to make it palatable. I still suspect Republicans will balk at the Buffett Rule…it’s going to be a big hit to donors.”
The tax increase included in the bill would be through what’s known as the Buffett Rule, which would limit tax breaks that currently let very wealthy Americans pay lower tax rates than more moderate-income Americans.
The bill is backed by 20 Democrats and two House Democrats introduced a companion bill in the House of Representatives on Tuesday, as well.
Republicans got behind the 3.86 interest rate for undergraduates and the 5.41 interest rate for graduate students last summer.
What Republicans aren’t likely to get behind is the Buffett Rule.
The bipartisan student loan bill passed last summer tied student loan interest rates to rates on 10-year Treasury bonds, essentially what it costs the government to borrow money. Warren’s bill would let student borrowers refinance at whatever the current rate is. It would also let some students with private loans refinance them at federal student loan rates.
Right now, there are about 40 million Americans with student loan debt. New borrowers take out an average of around $30,000, and and nearly a third of federal student loan dollars are in default, forbearance, or deferment. Some undergraduate borrowers are paying interest rates of more than six percent while new borrowers lock in a much lower rate.
That’s especially frustrating for students, when, according to a new Congressional Budget Office (CBO) report, student borrowers and their families will generate $127 billion for the department over the next 11 years.
Warren has been critical of the Obama administration profiting from student loans and has not been afraid to say so, drawing support from students who have felt overlooked by lawmakers.
“I’ve made no secret about my disagreements with the administration’s policies, particularly as they relate to the largest financial institutions,” Warren told HuffPost Live recently. “Like I say in the book, the president chose his economic team, and when there was only so much time and so much money to go around, his economic team chose Wall Street instead of American families who were in trouble.”
Her most recent bill may mark a more moderate step than her previous proposals, but Tahir Duckett, national young worker coordinator for the AFL-CIO and a supporter of the Higher Ed, Not Debt coalition, wouldn’t exactly call it moderate.
“I think it’s a savvy move by Senator Warren,” he said. “If she started with this bill, people would be saying that this bill is radical, so moderate is not the word that necessarily I would use to describe it. I think it’s a brave stand and a step in the right direction.”
He thinks it’s the type of bill that will energize young voters to turn out at midterm elections, where young voter turnout has historically been dismal.
“Young people aren’t dumb,” he said, adding that they’re not just going to support anybody; it’s got to be a candidate who shows up to talk to young people and hear their concerns.
Warren has said repeatedly that she will not run for president in 2016, but the more moderate proposal may signal to a wider audience that she’s ready to play ball on the student loan issue.
The new bill means Warren is “pushing policy,” Lewis said, adding that as the Democratic Party has “rushed rightward,” Warren is now showing a willingness to “push back.”
“The rhetoric she uses and the policy she argues is starting to become more palatable to the Democratic Party at large,” she said. “So we can start pulling the dialogue toward true center rather than center right.”