Rob Horowitz: Obama and Warren: Making Strides on Student Loans
Tuesday, June 17, 2014
With total outstanding student loan debt topping $1 trillion and continuing to climb, President Obama issued an executive memorandum last week, expanding by 5 million the number of borrowers eligible to cap their student loan payments at 10% of income. The expansion of the so-called ‘Pay as Your Earn Program’’ provides welcome relief to a critical sub-set of borrowers facing a difficult financial squeeze as they work to launch careers, save money to buy their first home, and begin to raise families.
A report prepared by The Council of Economic Advisors and The Domestic Policy Council and released by the White House in conjunction with the President’s executive action highlights the problem: According to the report, “Today, 71 percent of those earning a bachelor’s degree graduate with debt, which averages $29,400.”
During his announcement of this Executive Action, and a couple of others also aimed at providing some relief to student loan borrowers, President Obama took the opportunity to indicate his strong support for Senator Elizabeth Warren’s (D-MA) legislation paving the way for existing student loan borrowers to refinance their loans at the current student loan interest rate mandated by Congress of 3.86 percent. The ability to refinance at this significantly lower interest rate would help up to 25 million borrowers reduce their student loan payments. More than half of student loan borrowers in Rhode Island and Massachusetts would benefit from this program, according to the White House.
GET THE LATEST BREAKING NEWS HERE -- SIGN UP FOR GOLOCAL FREE DAILY EBLASTSenator Warren’s legislation is appropriately entitled “Bank on Students Emergency Loan Refinancing Act.” Upon its introduction, Warren said, “Exploding student loan debt is crushing young people and dragging down our economy. Allowing students to refinance their loans would put money back in the pockets of people who invested in their education. These students didn't go to the mall and run up charges on a credit card. They worked hard and learned new skills that will benefit this country and help us build a stronger middle class and a stronger America."
Unfortunately, Warren’s bill fell 4 votes short of clearing a Republican filibuster last week. But the fact that it gained 56 votes in the Senate on the first attempt to pass it bodes well for its future prospects. This is especially the case because Warren’s legislation includes the Buffet rule, putting in place a 30% minimum total federal tax on millionaires as the offset to the cost to the federal treasury of going forward with giving student loan borrowers the option of refinancing. The Buffet rule is anathema to most Republican Senators, some of whom could likely be persuaded to join the 3 Republicans who did vote for the legislation, Senators Collins (R-ME) Corker (R-TN) and Murkowski (R-AK), if a different funding source is identified.
The stakes are high in the fight to make college more affordable. Boosting the percentage of Americans who get college degrees is central to our continued economic competitiveness. And it is more important than ever to an individual’s ability to earn a middle class income. As documented in a recent PEW study, among young adults, ages 25-32, who are working full time, those with a college degree earn about $17,500 more annually than those with only a high school diploma. This is the largest education-based pay gap in the modern era-more than double what it was less than 50 years ago in 1965.
That is why President Obama is to be commended for his executive action on student loans and why it is critical to re-double efforts to pass Senator Warren’s sensible student loan refinancing legislation. Easing crushing student loan debt is one of the keys to making college more affordable for all.
Rob Horowitz is a strategic and communications consultant who provides general consulting, public relations, direct mail services and polling for national and state issue organizations, various non-profits and elected officials and candidates. He is an Adjunct Professor of Political Science at the University of Rhode Island
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