One popular topic in politics is the student loan debt issue. Given recent trends, it is not surprising anymore to hear that the amount of debt from higher education aid is increasing. Each and every year, the record for average student loan debt upon graduation is broken as the overall debt tally rises to over $1.3 trillion. With that being said, there are several politicians looking to introduce legislation with the intention to somehow stymie the growth of debt.
Student loan refinancing is an option for indebted graduates that helps lower overall interest owed on a student loan, and this option has been growing in popularity since restrictions were lifted on federal loans. While the government has improved the student loan refinancing system, there are politicians who call for further action.
One such politician is John Garamendi who is a Democratic congressman out of California. He announced his solution at the a UC student community center which is known as the Student Loan Refinancing and Recalculating Act.
This act has four main points. The first point is to refinance existing loans to reduce interest rates. The second point is to recalculate new student loans in order to lower interest rates. The third is to reduce the overall debt for college students, and the fourth point is to reinvest in the economy with new savings from borrowers.
It basically calls for lowering interest rates for current loans through refinancing and for future loans upon origination. With lower interest rates, students have less debt to worry about and more funds available. These funds are intended to go back into the economy. It essentially calls for a redirection of capital.
Overall, the idea is simple. Without these student loan burdens, graduates can invest in their future sooner by purchasing new cars and homes which helps bring vitality to the housing market and other industries. This solution works great in theory, but there are more factors to consider such as the rising cost of tuition.
If education expenses increase, then the amount in student loans is only going to increase. Lower interest rates is a step in the right direction, but larger principal payments on a loan lead to larger interest rates anyway. The efforts by the government can be eclipsed in a couple years by the uncontrollable cost of higher education. Overall, the student loan issue is a much more dynamic problem that may not be solvable through student loan refinancing alone.