It’s Our Interest: Refinancing Student Loan Interest Rates
America is facing a student debt crisis and millions of borrowers’ futures are at stake. That’s not news. What is news is that there’s a solution that could bring relief to young people and their families while also stimulating the economy. One word: Refinancing.
Total student loan debt has already skyrocketed past the $1 trillion mark and a recent report showing that now nearly 1 in 6 students default on their loans only further emphasizes the need for action.
But this isn't just a youth issue. The student debt crisis jeopardizes the economic well-being of middle class families, people of color, seniors—essentially all Americans.
In the last eight years, 14 million people have taken out education loans and the majority still repaying their loans are in their 30s or older. And with 81 percent of African-Americans and 67 percent of Latinos graduating with bachelor’s degrees in one hand and a student debt bill in the other, compared with 65 percent of whites and 54 percent of Asians, the disproportionately distributed burden makes this a racial justice issue too.
A large share of the population are saddled with education debt and the implications are wide-reaching. Homeownership is now at a 30-year low for people age 25 to 34 as a result student debt disqualifying them for mortgages. Medical school graduates with student debt are forced to take higher-paying jobs in major cities, creating doctor shortages in rural areas. And seniors’ retirement plans are hanging in the balance thanks to the student loan debt they've accrued by either taking out or co-signing for their children and grandchildren.
With so many Americans facing such debt, there's no wonder our consumer-based economy isn't repairing itself at the rate small businesses, economists and everyday working folks would like to see.
One way to provide educational debt relief to millions of Americans to use a model that already works.
The Federal Reserve has kept interest rates low in an effort to encourage businesses to hire new workers and grow the economy, making it possible for consumers, corporations, and even state and local governments to refinance their existing loans at lower rates and reap significant savings. So why isn't refinancing an option for student loans yet?
Ensuring that borrowers are able to pay off their loans in a manageable fashion gives Americans back much of the purchasing-power they lost in 2007. Longer-term investments in staples of the American Dream, like cars and homes, are beneficial for both the individual and for the economy as a whole.
Envisioning a globally competitive workforce without some form of post-secondary education is a thing of the past as college degrees become as ubiquitous as high school diplomas. Financing a college education has become increasingly difficult and while student loans might pay for the degree, achieving economic independence after graduation is becoming much harder.
Allowing borrowers to refinance their education loans will allow millions of Americans to get on a path to repayment with a reasonable interest rate, lower monthly payments, and the ability to begin saving for their future. Read more about refinancing proposal here.
There are 37 million people with student debt in the United States and allowing them to refinance their loans will not only create a brighter future for them and their families—it will help grow the economy and ensure that the American Dream is still possible for all those ready to work for it.
This blog was originally published on Campus Progress and is reprinted here with permission.