WASHINGTON, D.C. – Today, Senator Peter Welch (D-VT) and Congressman Joe Courtney (D-CT) introduced legislation to lower the cost of college for current and future borrowers.
The Student Loan Interest Elimination Act would refinance the interest on federal student loans for all existing borrowers to zero percent and cap interest rates for future borrowers. Thanks to this fix, 43 million Americans with existing federally held student loans would see their interest rates immediately eliminated.
“Student debt holds so many Vermonters back from achieving their dreams—whether they’re hoping to buy a home, grow their family, or simply trying to make ends meet. It shouldn’t be this expensive to get an education, and it shouldn’t be this hard to pay off your debt,” said Sen. Welch. “We can—and should—keep pushing for debt forgiveness, but we also need to make college more affordable for future generations and avoid saddling students with additional debt from high interest rates. By reducing the interest rate on existing federal student loans and capping future interest rates, The Student Loan Interest Elimination Act makes an affordable college education a reality for more students in Vermont and across the United States.”
“Students and families are already saddling the rising costs of a college education. The federal government should not exacerbate the problem by making money off borrowers’ federal student loans. In fact, the average public university student who takes out a federal student loan today would pay $7,800 over the standard 10-year period in interest. That’s the difference between making mortgage or car payments, affording medical care, or saving for a stronger retirement,” said Rep. Courtney. “This bill is particularly important in the wake of SCOTUS’ decision to strike down President Biden’s student loan forgiveness program. Students and families are counting on Congress to act on commonsense solutions to lower the cost of college and my bill will help achieve that goal.”
The interest rates for future student loan borrowers will be based on a sliding scale determined by financial need. No student will have an interest rate greater than four percent. This sliding scale will disincentivize students from taking out loans that they do not need. Importantly, the bill establishes a Trust Fund to pay for the student loan program’s administrative expenses that are currently covered by the interest paid by borrowers.
“Congressman Courtney and Senator Welch have figured out a way to eliminate student loan interest and help student loan borrowers. Their innovative solution of investing students’ principal repayments to earn a return is the first plan that addresses the cost of the student loan program. It comes at a critical time as students must renew payments this fall without the benefit of cancellation,” said Bob Hildreth, president of the Hildreth Institute, a research and policy center focused on improving access to higher education.
“The Student Loan Interest Elimination Act would provide significant relief for student borrowers and help expand access to educational opportunity. Its passage would be an important step toward a long-term solution to the student loan crisis,” said David Tritelli, Vice President for Communications and Public Affairs, American Association of Colleges and Universities.
The bill is endorsed by the American Association of Colleges and Universities, the Education Trust, and the Hildreth Institute.
To read a fact sheet on the bill, click here.