Sen. Charles Schumer Monday unveiled a proposal he says will help young professionals struggling to repay their education loans.
Legislation expected to be voted on June 1 in the Senate would allow borrowers of federal student loans locked in at high interest rates to refinance at the lower rate now offered on new federal student loans, which is 3.86 percent, Schumer (D-N.Y.) said.
The bill, which is unnamed, would not apply to the interest rates on private student loans. Schumer said 86 percent of outstanding student debt are federal loans, some with interest rates of up to 7 percent.
"It simply was unheard of in my day to graduate with such high debt; such a large burden," Schumer, 63, said at a media event on the campus of Hofstra University, where he was joined by students and recent graduates. "Every person in their late 20s, 30s and even into their lower 40s -- when you ask them what their problems are -- debt is at the top of their list."
Schumer and advocates of his proposal say the high cost of repaying a college degree is impacting the larger economy. Young adults are living with their parents longer, unable to buy homes and delaying marriage and having children, they say.
"The education that they needed to build a better life has become their biggest obstacle," said Lou Imbroto, president of LI Incs., a Long Island-based advocacy and networking group for professionals ages 22 to 35 years old. "Many of the milestones that mark adulthood must be delayed."
Schumer cited a recent study by the Regional Planning Association that found an estimated 54 percent of Long Islanders between ages 25 and 29 live at home with their parents and relatives.
Someone with $30,000 in student loan debt, for example, would pay about $5,000 less over the life of the loan at the 3.86 percent interest rate, compared with an interest rate of 6.8 percent, based on a calculation of Department of Education data.
There are nearly 40 million people in the U.S. with outstanding student loans.
The new plan has bipartisan support but has yet to be taken up by the House of Representatives, Schumer said.
The proposal follows last year's approval by Congress of the Bipartisan Student Loan Certainty Act of 2013, which set the undergraduate student loan interest rate at 3.86 percent for the 2013-14 school year.
Schumer, in supporting the refinancing proposal, noted that the 2013 law does not help those who took out student loans earlier than 2010 and are paying interest rates of 7 percent or higher.
A study by the Federal Reserve Bank of New York last year found that U.S. student loan debt is greater than credit card and auto loan debt, and is second only to mortgage loan debt.
Student loan debt totals $1.2 trillion in the United States, twice what it was in 2007.
Craig Camara, 22, a senior, will graduate from Hofstra on Sunday with about $60,000 in student loan debt, he said.
The marketing and information technology major originally from Starksboro, Vermont, said he plans to stay in the New York metropolitan area to launch his career.
"It is definitely scary without having a job yet," said Camara, who has been on several interviews. "I think once I have a job and a steady income, it will be tough to pay back, but totally worth it."