Recent activity in Congress at Washington D.C. is shedding light on student loans and the issues they pose to the up and coming graduates. Student loan debt has been increasing at an alarming rate over the past couple years; in fact, the debt tally has surpassed $1 trillion which makes it one of the largest types of consumer debt second to mortgages.
Many loans involving homes and automobiles are allowed to be refinanced which is an action that helps lower interest rates on an overall sum of multiple loans. Federal student loans, however, do not share this characteristic with its counterparts; in fact, options for refinancing are restricted by the federal government. This is an issue because over 80% of student loans are provided by the federal government, so a large sum of burdensome loans lack the options and flexibility that make other types of consumer loans manageable. Borrowers can only currently refinancing their student loans with private lenders.
In order to change this, United States House Representative from Wisconsin, Mark Pocan, introduced legislation that allows federal student loans to be refinanced for lower interest rates. The proposal allows subsidized Stafford loans, unsubsidized Stafford loans, and federal direct PLUS loans to be refinanced when borrowing rates are reduced.
As student loan debt increases every year, cause for concern increases along with it. To put it in perspective over roughly the past decade, the overall student loan debt total has nearly tripled. Students find themselves graduated with a considerable price tag over their heads, and many of them are delayed in moving on with their lives and careers as a result. This proposal from Pocan attempts to alleviate these concerns by providing more flexibility to student borrowers after graduation. The main idea is to lower interest rates so they are manageably payable. In the end, less loans are going to reach default status, and eventually, the outstanding student loan debt will begin to decrease.