U.S. Sen. Elizabeth A. Warren introduced legislation on Tuesday that would allow student-loan borrowers to refinance their debt at current interest rates. An identical bill is expected to be introduced in the House of Representatives on Tuesday evening.
"There’s no reason on earth to say some kids can get a better deal than others when they both worked hard to do exactly what we said they should do," Ms. Warren, a Massachusetts Democrat, said in an interview.
Student-loan interest rates for new borrowers were reduced last summer under legislation tying them to financial markets.
While she would like to see an even lower interest rate, said Ms. Warren, the bill aims to extend what Congress already approved for new borrowers to existing ones. It would also allow eligible borrowers to refinance private loans into the federal program, giving them access to its benefits and protections.
Ms. Warren cited two reasons for introducing the bill. First, she said, it "helps bring the federal-government profits out of the student-loan system" by reducing what borrowers would pay back.
And second, she said, "it’s about helping more borrowers have money left at the end of the month."
Although struggling borrowers can already use one of the federal government’s income-based repayment plans, they need the additional relief refinancing would provide, Ms. Warren said. Income-based repayment doesn’t work for all borrowers, she said, and can increase the total amount borrowers end up paying.
The House bill was to be introduced by two Democrats on the education committee, Rep. John F. Tierney of Massachusetts and Rep. George Miller of California. An analysis by the committee’s Democrats found that, under the legislation, a student who graduated last year with $30,000 in unsubsidized federal loans would save $4,000 over the life of the loans.
The bill would pay for refinancing student loans by increasing the taxes paid by millionaires and billionaires under the "Buffett Rule," a policy named for the investor Warren Buffett, who has said that the rich, including himself, should not be able to pay less in taxes, as a share of their income, than do people in the middle class.