U.S. Sen. Elizabeth Warren presented new legislation Tuesday to provide relief to student loan borrowers at a roundtable discussion hosted by Massasoit Community College.
Warren’s legislation would allow current and former student borrowers to refinance their loans at the lower rates being offered to new borrowers as a result of the Bipartisan Student Loan Certainty Act of 2013. When the act passed, interest rates dropped by roughly 3 percent for students who took out unsubsidized federal loans after July 1, 2013.
Boston University spokesman Colin Riley said the reform would be a positive step and encouraging student borrowers and aiding them in paying back their debt.
“People in universities care very much about the issues of student borrowing and student debt,” he said. “We support those initiatives that are going to provide good options to borrowers that will reduce the overall cost of attendance and enable students to attend. [Students] take advantage of these [options] and invest in their education by attending colleges.”
Natalia Abrams, co-founder of the non-profit organization Student Debt Crisis, emphasized the need for legislation that would aid borrowers paying high interest rates from former student loans.
“Currently a lot of the legislation is for new borrowers,” she said. “We really have to focus on the 40 million borrowers that hold $1.2 trillion in debt … There’s not enough currently being done for the existing borrowers, and that’s what is so great about what Warren is proposing right now because it offers relief for the existing borrowers to refinance.”
Failure to address this growing problem will affect the national economy, but progress has been stalled due to the inability of Congress to make reforms that are agreed upon, Abrams said.
“It takes the country a while to make substantial reforms, and it feels like it’s only until we have a massive crisis that we do some sort of band-aid measure,” she said.
Adam Minsky, a Boston lawyer who specializes in student loan law, said there are other factors that need to be considered in the wake of the new legislation. Refinancing could cause some borrowers who are already on modified repayment plans to end up paying more in the long run.
“Refinancing would essentially mean that borrowers would get a new loan that would restart the clock on their repayment,” he said. “If there’s already several years on their repayment, then that might negate some of the positives effects of the lower interest rate if they just wind up having to have a longer repayment plan.”
Riley said borrower protection has to be maintained in any legislation to ensure that all students are protected, whether they choose to refinance or not.
“Any borrower who is considering changing the conditions of their loan needs to be fully aware of what any changes will mean,” he said. “They want to be able to continue to have the same borrower protections [as the previous loan]. If [the refinancing] continues to offer the same borrower protection, it would be worth it for any student to look into it.”
Several residents said they are in favor of a cut in federal student interest rates and hope the refinancing of loans will aid individuals and boost the economy of Massachusetts.
Justin McCarthy, 29, of Brighton, graduated in May and is beginning to feel the stress of student loan debt.
“I’m just in the beginning stages of starting to pay my loans back and it’s a heavy burden,” he said. “It’s hard to budget for discretionary expenses on top of everything else that I’m paying like rent and normal living expenses and then the student loans on top of that. If [the interest rates] were reduced, it would help me out a lot.”
Remy Birnbaum, 19, of Boston, said young people need to have the ability to afford large investments, and with large student loan debts, that may not be possible.
“It would help,” she said. “It [would] take less time for them to pay off their student loans, so in the end, they’ll have more disposable income, and they can return that income into the economy. They can buy cars, start buying houses earlier and it would help the entire economy as a whole.”
Michael Keefe, 28, of Brighton, said students with less debt would help the economy and aid the success of businesses, such as his own.
“We need people with disposable income in order to keep our business afloat,” he said. “People, especially in a city like Boston, have enormous student loans, and a lot of the workforce is going to be graduating over the next few years. That’s only going to help to stimulate the economy if they have more money.”