Congress should cut student borrowers some slack. They should be allowed to refinance college loans at a lower interest rate just like homeowners and other borrowers.
Former students nationwide are saddled with $1.2 trillion in education debt, a sum that has quadrupled in the past decade and now surpasses both auto loan and credit card debt. The nation's 40 million student borrowers include 2.7 million in New York who owe an average of $27,000 each, according to Sen. Kirsten Gillibrand, who wants the federal government to give them a break.
She's sponsoring legislation that would allow borrowers to refinance their student loan balances -- most at interest rates more than 6 percent -- at a fixed rate of 4 percent. The savings for borrowers would be substantial. According to Gillibrand, a graduate with $26,000 in loans at 6.8 percent interest would be obligated to pay more than $47,600 over 20 years, including $21,600 in interest. Refinancing at 4 percent would save about $9,800.
Gillibrand's bill hasn't attracted the congressional attention it deserves. There may be some issue fatigue since last August Congress enacted legislation tying the interest on new student loans to market rates But Gillibrand's bill would provide retroactive relief for students burdened with debt they took on in previous years.
Graduates are struggling to pay those debts. Last year, one in eight student loans nationally was delinquent, up from one in 13 in 2007, just before the financial system's near collapse slammed the brakes on the economy and made finding work so difficult.
President Barack Obama should make winning congressional approval for refinancing student loans one priority in his important push to resuscitate the promise of economic mobility for the striving poor and middle class.