Courtney Introduces Bill to Give Student Borrowers a Fair Deal in the Road to Economic Recovery Amid COVID-19 Pandemic
NORWICH, CT – Today, Congressman Courtney, along with 40 of his colleagues, introduced the Coronavirus Emergency Student Loan Refinancing Act—legislation that allows student loan borrowers to take advantage of record-low yields on 10-year Treasury notes and refinance their loans down to lower rates, in turn lowering monthly payments. As homeowners take advantage of the markets and refinance their mortgages, student loan borrowers are barred by law from refinancing their loans, which can carry interest rates as high as seven percent on legacy undergraduate loans. With more than 44 million Americans holding student loan debt, creating a program to refinance this debt down to lower interest rates will put money back into the pockets of Americans and create a much-needed stimulus for the economy that will last for years after emergency declarations sunset.
“Americans are worried about their finances more than ever, and while efforts by the Administration and Congress have sought to ease the burden of student loan debt during this uncertain time, none of the proposals have identified long-term solutions to keep monthly payments low while adding a cash infusion into the economy,” Courtney said. “The Coronavirus Emergency Student Loan Refinancing Act will allow borrowers to use markets to their advantage, lower monthly payments, and stay on top of their bills while leaving them with extra cash to put back into the economy. Student loan refinancing isn’t a new idea—it has been a priority of mine for years and there is no better time to get this policy moving than right now.”
The Coronavirus Emergency Student Loan Refinancing Act would allow all student loan borrowers – both federal and private – to refinance their loans down to lower rates. For private student loan borrowers, the federal government would pay the balance of the loan through a federal student loan, with interest rates matching those for federal borrowers. A borrower who chooses to refinance will have their loan refinanced down to a rate equal to the lowest yield of the 10-year Treasury note in the preceding six months, plus a fixed percentage rate calculated through the Student Loan Certainty Act of 2013. Using the March 9 10-year Treasury note yield of 0.54% as an example (the lowest yield in the last six months), student loan interest rates would be calculated as follows:
- Undergraduate loans: 2.59% (compared to 4.53% for the 2019-2020 school year)
- Graduate loans: 4.14% (compared to 6.08% for the 2019-2020 school year)
- PLUS loans: 5.14% (compared to 7.08% for the 2019-2020 school year)'
Student loan borrowers in their 30s – including many who are starting new families now – are carrying undergraduate loans with interest rates that are as high as seven percent. For those borrowers, a refinancing proposal like the Coronavirus Emergency Student Loan Refinancing Act would make a huge difference in monthly payments. Since the bill only allows borrowers to refinance down to the lowest yield of the 10-year Treasury note in the preceding six months, as the economy improves, borrowers will no longer seek to refinance—much like how consumers refinance mortgages.
Congressman Courtney has long been an advocate for student loan refinancing. Every Congress, he leads the Bank on Students Emergency Loan Refinancing Act with Senator Elizabeth Warren (D-MA), which would allow legacy borrowers to refinance down to the new student loan rates set at the beginning of each school year.
Last year, the Education & Labor Committee reported out the College Affordability Act, a rewrite of the Higher Education Act that makes sweeping improvements across higher education and includes a version of Congressman Courtney’s student loan refinancing policy.