US Senate Democrats offer bill on refinancing of student debt

WASHINGTON: US Senate Democrats unveiled legislation on Wednesday to allow millions of Americans with student loan debt to refinance at lower interest rates.

Democrats said their measure would let holders of both federal and private undergraduate loans - some with rates of up to 8 and 9 per cent and more - to refinance at 3.86 per cent.

Drafted in coordination with the White House, the bill is part of Senate Democrats' 2014 legislative agenda aimed at giving all Americans "a fair shot" and rallying the party's liberal base in advance of the November elections.

But like earlier rejected measures to raise the minimum wage and renew expired long-term jobless benefits for millions of Americans, it was unclear if the measure will become law.

No Republicans attended a news conference where the bill was unveiled, but Senate Democrats voiced confidence it would have bipartisan support by the time it is voted on, likely in June.

"Student loan debt is a real and growing crisis that is crushing young people and dragging down our economy," said Senator Elizabeth Warren of Massachusetts, a lead sponsor.

"When interest rates are low, homeowners, businesses and even municipalities refinance their debt. But right now the government doesn't offer a refinancing option to students," she noted.

"Allowing students to refinance their loans would help give them a fair shot at an affordable education," Warren said.

Last year, Congress approved the Bipartisan Student Loan Certainty Act of 2013, which set the undergraduate student loan interest rate at 3.86 per cent for the current school year.

Democrats, who want to make that rate permanent, said the nonpartisan Congressional Budget Office was expected soon to determine the cost of their bill to the federal government.

They said the cost could be covered by enacting the "Buffett Rule," named for billionaire Warren Buffett and rejected in 2012 by Senate Republicans.

It would require households earning more than $1 million a year to pay at least a 30 per cent tax rate, thus limiting their use of loopholes to lower tax liability. Democrats said they would consider a different offset if Republicans offered one.

Democrats cited federal data showing that student-loan debt grew by $31 billion from January to March, now totaling $1.1 trillion, making it the fastest-growing household debt category.

Overall, about 40 million Americans have student loan debt, Democrats said.

They said under their bill, a person with a student loan debt of $30,000, paying a 6.8 per cent interest rate, would save about $5,000 over the life of the loan by refinancing to 3.86 per cent.