By Kelsey Durham
U.S. Sen. Kirsten Gillibrand (D-N.Y.) has signed on to legislation that would allow college graduates with outstanding student loan debt to refinance their interest rates, saving college graduates tens of billions of dollars collectively in the first year alone if the bill were to pass.
Gillibrand’s proposal was included in a bill, titled the Bank on Students Emergency Loan Refinancing Act, introduced May 6 by Sen. Elizabeth Warren (D-Mass.) to reduce the amount of debt college graduates are buried under after finishing school.
Under Gillibrand’s addition, students in New York would be able to refinance interest rates on federal and private loans to a figure as low as 3.86 percent for undergraduate loans and 5.41 percent for graduate loans.
The legislation comes amid what Gillibrand called a “student loan crisis” that has left New Yorkers with more than $60 billion in student loan debt, while the national figure sits at about $1.2 trillion.
“People owe more now on student loans than they do on credit cards or auto loans and it’s holding back economic growth,” she said. “Graduates aren’t starting their careers on even ground, they’re starting them under water, and some of them are having a hard time staying afloat.”
In New York state, the average student loan debt in 2012 amounted to about $27,000, according to the Federal Reserve Bank of New York, and nearly 12 percent of borrowers were delinquent on their loan payments by the end of last year.
In Queens, where 64 percent of residents ages 18 to 34 have some form of post-high school education, the delinquency rate is about 11.1 percent, slightly lower than the citywide figure of 11.5 percent.
With interest rates as high as they are now, Gillibrand said graduates can end up paying back nearly double the amount of money originally borrowed — more than $21,000 in interest alone.
By lowering interest rates to the proposed amount, graduates nationwide could save around $10,000 per person in interest payments and a collective total of close to $14.5 billion in just the first year of the legislation, according to data from the Center for American Progress.
“That’s a huge amount of savings that’s pumped back into the economy,” Gillibrand said. “If they have that extra $10,000 in their pocket, they could start that small business or put a down payment down on a home or start a family.”
The bill had more than a dozen sponsors from the Senate as of Wednesday, but Gillibrand said the Democratic Party is still working to gain the support of a Republican sponsor. She said she had spoken to several already and many said they were interested but had not officially signed on yet.
Gillibrand also said she thinks the bill will go to a vote next month, but hopes it gains more support in the meantime.
“We have to do something to keep student loan interest rates low and manageable,” she said. “This is the common-sense answer that’s right in front of us.”
Reach reporter Kelsey Durham at 718-260-4573 or by e-mail at kdurham@cnglocal.com.
