Sen. Lamar AlexanderLamar AlexanderVeep auditions in overdrive Senators press Obama education chief on reforms Senate honors Tennessee coach Pat Summitt MORE (R-Tenn.) said he hoped President Obama would work with Republicans on a student loan bill instead of backing a Democratic plan that raises taxes.
“Last year, the president and Congress worked together to cut nearly in half interest rates on all new student loans for undergraduates,” Alexander said on Sunday. “Hopefully he will work that way again instead of joining Senate Democrats' political stunt to give some former students a $1-a-day subsidy to help pay off loans while raising income taxes by $72 billion.”
“Senate Democrats are working on a bill that would help more young people save money,” Obama said. “Just like you can refinance your mortgage at a lower interest rate, this bill would let you refinance your student loans. And we’d pay for it by closing loopholes that allow some millionaires to pay a lower tax rate than the middle class.”
It is unlikely that Republicans will join Democrats to advance the bill because it raises taxes.
The Congressional Budget Office (CBO) determined that allowing former students to refinance their loans would cost $51 billions, but the tax increase on the wealthy would fetch $72.5 billion in revenue for the federal government meaning the bill has a net gain of more than $20 billion.
Democrats argue that allowing borrowers to refinance student loans to a lower rate, the way people currently can with car loans and mortgages, would give the middle class a “fair shot” and free up funds that could be put to better use elsewhere in the economy.
Alexander, who serves as ranking member of the Senate Health, Education, Labor and Pensions Committee, said lawmakers should instead focus on the “complicated” loan repayment process to help students.
“Republicans want to work with the president on the real student debt problems: overly complicated loan repayment programs, mostly caused by the Obama administration itself, and excessive borrowing, mostly caused by a very small percent of graduate students,” Alexander said. “Ninety percent of all loans over $100,000 are graduate loans — and these loans are just 6 percent of all graduate loans and less than 2 percent of all student loans.”
Student loan debt in the United States now exceeds credit card debt, with $1.2 trillion of outstanding student loans. Most graduates are locked in with loan rates between 5 and 10 percent — whereas now loan rates are closer to 3 percent. Warren said that if those students were allowed to refinance their loans to today's rates they could pay down their debt faster and more easily buy a house or contribute to stimulating the economic recovery.
— Alexandra Jaffe contributed to this article.