06.02.22

Whitehouse Introduces Zero-Percent Student Loan Refinancing Act

Bill would allow Americans to refinance their federal student loans to pay no interest - helping them escape a vicious cycle of debt

Washington, DC – Senator Sheldon Whitehouse (D-RI) has introduced the Zero-Percent Student Loan Refinancing Act, which would allow Americans to refinance their federal student loans at a zero percent interest rate.  The bill would help borrowers pay down the principal on their loans more rapidly and ease a massive burden on tens of millions of people carrying student debt.  Congressman Joe Courtney (D-CT) has also introduced the bill in the House.

Big student loan interest payments can create a treadmill of debt that many Americans can’t escape.  Those interest payments often stand between borrowers and the financial freedom to focus on the future, whether it’s buying a home, saving for retirement, or investing in their children,” said Whitehouse.  “This bill will help people pay off their loans more quickly and get on with their lives.”

Student loan debt is a massive burden on American families.  According to the Federal Reserve Bank of St. Louis, student loan borrowers owed a combined $1.75 trillion to the federal government and private lenders as of April 2022.   The average U.S. household with outstanding student debt owes $57,520 in loans, according to NerdWallet’s 2020 household debt study.  Student loan debt is also shared among a large swath of American borrowers, with 48 million Americans – or one in eight – carrying student loan debt of some kind.

Unfortunately, many federal student loans continue to accrue interest even during periods of in-school deferment, hardship forbearance, and other times during which no payments are due.  Moreover, borrowers repaying loans using an income-driven repayment plan may have a monthly payment that is too low to cover the interest that accrues each month.  As a result, their loan balance grows over time even as they make payments.  A 2021 joint report by the National Consumer Law Center and the Center for Responsible Lending found that 63 percent of student loan borrowers who made payments during the CARES Act payment pause still owe more now than they originally borrowed.

The Zero-Percent Student Loan Refinancing Act would:

  • Allow student loan borrowers to refinance their federal loans to zero percent – all eligible federal FFEL, Direct, Perkins, and Public Health Service Act student loan borrowers could refinance their high-interest loans down to zero percent through December 31, 2024.
  • Automatically refinance debt for Direct loan holders.

Full text of Whitehouse’s bill is available here.

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