Sen. Bill Nelson files bill to cut student loan rates, allow borrowers to refinance

WASHINGTON, D.C. – Less than two weeks after the federal government increased interest rates on federal student loans, U.S. Sen. Bill Nelson (D-FL) filed legislation to cut student loan rates across the board and allow borrowers with existing student loans to refinance to new lower rates.

On July 1, federal student loan interest rates for undergraduate students increased from 3.76 percent to 4.45 percent. If approved, Nelson's bill would cap rates for undergraduates at 4 percent, and allow borrowers with existing student loans that have a rate higher than 4 percent to refinance their loans to the new lower rate – a move that's currently barred under existing law.

“If we really want to build a strong middle class, we have to make higher education more affordable,” Nelson said on the Senate floor. “Capping interest rates, ending loan origination fees and allowing borrowers to refinance existing student loans would certainly help make education more affordable for our students and it would help ease the financial stress that’s weighing down our economy.”

More than 43 million Americans currently have outstanding student loan debt. In Florida alone, students graduating with a four-year degree leave college with more than $24,000 in student loan debt on average.

In addition to capping student loan rates, Nelson’s bill would also eliminate the “loan origination fees” charged to students to process their loans. These fees are often taken out of a student’s original loan amount before they receive it. Nelson’s bill would eliminate the fee altogether.

Once they are set each year, student loan interest rates are fixed for the lifetime of the loan and cannot be refinanced, even if rates go lower. Borrowers who took out loans between July 1, 2006 and July 1, 2013, likely have a fixed rate of 6.8 percent. And despite a significant drop in interest rates since 2013, current law bars those borrowers from refinancing their existing loans. Nelson’s bill would change that by allowing any borrower with an existing federal student loan to refinance their loans one time to a new lower rate.

In addition to capping undergraduate rates at 4 percent, Nelson’s legislation would cap rates for graduate students at 5 percent and the rates for parents of undergraduates at 6 percent.

Nelson says capping interest rates, ending loan origination fees and allowing borrowers to refinance existing loans would help to make education more affordable for Florida students.

A copy of Nelson’s legislation is available here. 

Following is a rush transcript of Nelson’s remarks on the Senate floor this afternoon, and here’s a link to watch video of his speech: https://youtu.be/zWGKD0ph4iw

U.S. Sen. Bill Nelson

Remarks on the Senate Floor

July 10, 2017

Sen. Nelson: Mr. President, I want to talk about a heavy financial burden that too many of our fellow Americans are being forced to deal with and what I’m talking about is student loans. 

And you may be surprised to know that the second most amount of debt in America next to mortgage debt -- home mortgage debt, the second largest to mortgage debt is student loan debt. $1.3 trillion more than all the credit card debt combined in America, student loan debt is higher than that -- $1.3 trillion. 

So graduates recently from the class of 2016 have more than $37,000 in student loan debt, on average, when they graduate. To make matters worse, the federal government last week announced that it was increasing interest rates on federal student loans for this coming school year, which starts in September, for undergraduate students rates are increased from last year 3.76 to 4.45%, almost three-quarters of a percent. And that starts – started – on July the 1st.

Well, our economy is built on ingenuity and creativity of young entrepreneurs who took a risk on something new, but today instead of sending our graduates off to be creative and conquer the world, we're sending them with a tremendous amount of debt that they are struggling to afford. 

While I was in Florida last week over the July 4th recess, I met with a group of recent graduates and we wanted to discuss their student loans and they were not shy about telling me about it. Many of them had high interest rates. They wondered how were they going to pay off that debt, how they were going to be able to be unshackled from that financial burden so they could get on about the business of building their career and starting a family. 

Let me give you some examples of the students I met with. One young lady graduated from the University of Central Florida in 2015 with $50,000 in student loan debt. The interest rate on her debt was 4.85%. She knows that her parents, who have helped her before -- they are small business owners -- they are not going to be able to continue to help her out financially, but she, even so, was the first person in her family to graduate from college. That student is currently attending George Washington University for grad school, after which she is estimated her total debt will be $90,000 in student loans. She told me about what every student longs to do, to purchase a home, start a family, get on with their career, but that's increasingly becoming a pipe dream for millennials because of the burden of student loan debt. 

Another student I met from Deltona, Florida, she works as a social worker for the homeless. She graduated with a bachelor's degree in social work and a master's degree in the same from Florida State. She's dedicated her life to public service and helping the most vulnerable among us. Yet, she is facing $75,000 in student loan debt while carrying interest rates that range from 5.4% to 6.8%. 

In Florida alone, students graduating with a four-year degree are leaving an average of more than $23,000 in student loan debt. The thought of trying to start a career with that much debt is discouraging when some students, even after attending college in the first place, they are still struggling, they want to go on to grad school, or they are still in school wanting to finish their degree, but then they have that constant fear of having more and more debt when they graduate. 

That's not in anybody's interest -- not the students, not the families, not the communities and it's certainly not in the country's best interest. 

If we really want to build a strong middle class, we have to make higher education more affordable and that's why today I am filing legislation to lower the cap on student loan interest in the so-called lender origination fees and allow those with existing loans to refinance at a lower rate, namely 4%. 

Remember, I told you about that one student I met that had loans that went anywhere from 5.5% to 6.8%? That was because that was the interest rate in that particular year of their education. 

I think they ought to be able to refinance all of that at a max of 4% and so the bill that I am filing today, which we're calling the Student Loan Relief Act, would cap student loan interest rates for undergraduates at 4%, graduates at 5%, and parents, a cap of 6%. 

It would also help students borrow less by ending the loan origination fees that the government charges students -- that the government charges students -- to process their loan. So, for example, if it's a $10,000 loan, they'll take out a loan origination fee of $400 so the actual loan that the student gets is $9,600. These fees are taken out before the student receives the loan. The bill that we're filing would eliminate those fees all together. 

And one other thing that the bill would allow: any borrower with an existing federal student loan to refinance their loans one time to a lower rate. 

Once the federal government sets the student loan interest rates for the year, they are fixed now, under current law, for the lifetime of that loan and they can't be refinanced even if the rates go lower. That doesn't -- that's certainly not in the interest of the student. So, for example, borrowers who took out loans between July of 2006 and July of 2013 likely they have a fixed rate of 6.8%. And despite the significant drop in interest rates since 2013, current law bars those borrowers from refinancing their existing loans. That's not common sense. 

Between ‘06 and ‘13, the interest rate on student loan debt got as high as 6.8%. Students that took out loans during that time are now stuck with those rates. They can't refinance that debt like you could with a home loan. This bill would fix that by letting those borrowers refinance their debt with the new loans that have the lower interest rates. 

Capping interest rates, ending loan origination fees and allowing borrowers to refinance existing loans would certainly help make education more affordable for our students and it would help to ease the financial stress that's weighing down our economy and keeping some graduates from making the types of investments that traditionally lead to stronger middle-class membership like, for example, homeownership. 

Sometimes in all of the partisan back-and-forth, some folks begin to forget why we're here to serve the people. And so I urge our colleagues to take a serious look at this bill and join with me in helping those we represent. We can't continue to leave our graduates saddled with so much student debt and no way out. We have to do something to ease the burden and I believe that this is a good way to start.

And so I would just conclude by recalling what I said at the outset. You may be surprised to learn that student loan debt is the second largest debt carried in America next to home mortgage debt. You can take all the credit card debt in America and combine it all and it's not as much as the $1.3 trillion of student loan debt that is carried today. 

We need to help those students and, thereby, we are helping our country.