Democrats said their measure would let holders of both federal and private undergraduate loans – some with rates of 9 percent or higher – to refinance at 3.86 percent.
Drafted in coordination with the White House, the bill is part of Senate Democrats’ 2014 legislative agenda aimed at giving all Americans “a fair shot” and rallying the party’s liberal base in advance of the November elections.
But like earlier rejected measures to raise the minimum wage and renew expired long-term jobless benefits for millions of Americans, it faces Republican opposition that could kill it.
“This bill would be hugely expensive,” said Republican Senator Jeff Flake of Arizona. “I don’t think it will be seriously considered.”
The effort is part of of a broader messaging battle meant to portray Republicans as out of touch with the middle class. It goes part and parcel with the Democratic push to raise the minimum wage.
It also comes as Democrats seek ways to bolster turnout among their core supporters for the midterm elections, when an older and whiter electorate generally shows up to vote.
Let the rich pay for it.
The bill would cover the costs of those refinancings by enacting the “Buffett Rule,” a Democratic policy prescription that would ensure the wealthy pay some minimum amount of tax.
The costs are unknown, but taxes would be raised as much as needed.
Lawmakers still do not know how much the refinancing plan would actually cost, but they say they will adjust the terms of the Buffett Rule to fully cover the expenses of letting people refinance down to lower rates.
‘It’s the economy, stupid.’
They also argued that letting borrowers refinance at lower rates would be good for the overall economy. For example, freeing up funds that would have gone to pay higher interest could enable younger people to save money to buy a house or a car.
A study from the New York Fed released Tuesday found that 25-year-olds have an average of $21,000 in student loan debt. And young Americans with student loan debt are taking on mortgages at the lowest rate in a decade, and lag behind their peers who do not have college loans.
Schumer said student loan debt, which has grown in recent years to more than $1 trillion and is now the largest type of consumer debt, is “one of the major reasons our housing market is down in the dumps.”
“The whole economy has been weighted down by the huge debt burden on 40 million Americans aged 22 to 42 or so,” he said.