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Welch fights to allow borrowers to refinance student loan debt at lower interest rates

September 3, 2014
Press Release

At a press conference this morning at the University of Vermont, Congressman Peter Welch outlined legislation he is advocating that would allow borrowers to refinance federal and private student loans to take advantage of lower interest rates.  Welch was joined by UVM Provost David Rosowsky and Vermont Student Assistance Corporation President Scott Giles, as well as recent college graduates who would benefit from the legislation.


“Too many of today’s college graduates are entering the work force with student loan debts equivalent to that of a home mortgage.  Put simply, graduates are buried in debt before they earn their first paycheck,” said Welch.  “This mountain of debt is holding back a generation of young Americans from buying a car or home, saving for retirement, or starting a small business.  It defies common sense that student loans cannot be refinanced, just like home mortgages, to take advantage of lower interest rates.  Our legislation will allow graduates to do just that.”

Current law prevents borrowers from refinancing student loans to take advantage of historically low interest rates.  Graduates entering the work force often have a portfolio of loans with interest rates locked in at 8 percent or higher.  Total student loan debt in the United States has surpassed $1.2 trillion, exceeding debts held on credit cards and auto loans.  In Vermont, nearly 65 percent of students graduate with student loan debt, which averages $28,299 per student.

The Bank on Students Emergency Loan Refinancing Act (H.R. 4582) would allow borrowers to refinance their federal and private student loans at last year’s market-based rates.  Specifically:

  • Undergraduate loans would be refinanced at a rate of 3.86 percent;
  • graduate education loans would be refinanced at a rate of 5.41 percent; and
  • loans taken out by parents would be refinanced at a rate of 6.41 percent.

Under the terms of the bill, a graduate who borrowed the national average of around $30,000 through unsubsidized federal loans to pay for their undergraduate education would save more than $4,000 in interest payments under this legislation.  An individual borrowing $40,000 for a graduate degree would save more than $2,500 in interest payments. And a family who borrowed $50,000 to pay for their child’s education would save more than $3,500.

According to the Congressional Budget Office (CBO), the legislation would cost $51 billion over ten years.  It would be paid for by implementing the so-called “Buffet Rule” which requires higher income individuals to pay their fair share of taxes. CBO estimates the Buffet Rule would cover the cost of lower student loan interest rates while reducing the deficit by about $22 billion over ten years.

Rep. Welch has long championed making higher education more affordable for Vermonters.  Last month, the House of Representatives approved two Welch-authored college affordability amendments in overwhelmingly bipartisan votes. The amendments would allow high school students participating in dual enrollment programs to earn college credit and create a task force to review higher education regulations that contribute to escalating college costs. Read about them here

H.R. 4582 is the House companion legislation to S. 2432, introduced in the Senate by Senator Elizabeth Warren (D-MA).