Democrats introduce bill to eliminate student loan interest for current borrowers

Congressional Democrats on Thursday introduced legislation that would immediately cut interest rates to 0 percent for all 44 million student loan borrowers in the U.S. 

While the Student Loan Interest Elimination Act, introduced by Rep. Joe Courtney (D-Conn.) and Sen. Peter Welch (D-Vt.), would cover current borrowers, future ones would still be on the hook for interest, though under a different system. 

The interest rates for future borrowers would be determined by a “sliding scale” based on financial need, leading some borrowers to still have 0 percent on their interest. No student would get an interest rate higher than 4 percent. 

Furthermore, the bill will establish a trust fund where interest payments would go to pay for the student loan program’s administrative expenses. 

“Students and families are already saddling the rising costs of a college education. The federal government should not exacerbate the problem by making money off borrowers’ federal student loans,” Courtney said. "In fact, the average public university student who takes out a federal student loan today would pay $7,800 over the standard 10-year period in interest. That’s the difference between making mortgage or car payments, affording medical care, or saving for a stronger retirement."

All the co-sponsors for the bill are Democrats, and it will likely have a hard time getting the needed support in the Republican-controlled House. 

Student loan interest payments are set to restart in September after a three-year pause began under the COVID-19 pandemic. Borrowers have other options to try to handle their interest payments as they turn back on.

Under President Biden’s new SAVE program that will be implemented soon, borrowers who are making their monthly payments won’t be charged for unpaid monthly interest.

The legislation comes less than a month after the Supreme Court struck down Biden's previous student loan forgiveness plan, which would have provided debt relief of up to $10,000 for most federal borrowers and up to $20,000 for Pell Grant recipients. Republicans hailed the ruling as a just outcome, while Democrats have been pressing for more options to protect borrowers.

House fails to overturn Biden veto in effort to cancel student debt relief

House Republicans were not able to convince the two-thirds majority they needed to overturn President Biden’s veto of a resolution that would have shot down his proposal to cancel up to $20,000 of a borrower's student debt. 

The 221-206 vote on attempt to overturn Biden's veto of a Congressional Review Act (CRA) resolution to end the president’s debt relief plan is officially dead in the water. Beating Biden’s veto would have required two-thirds support in the House and the Senate — both of which passed the original resolution.

Earlier this year, the Government Accountability Office found Biden’s student loan forgiveness plan was subject to the CRA, which lets Congress suspend actions taken by the president. 

Republicans jumped on the opportunity, quickly introducing a CRA measure in the House attempting to stop the student debt relief.

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In May, the House passed the resolution 218-203, with the support of all Republicans and two Democrats, Reps. Jared Golden (Maine) and Marie Gluesenkamp Perez (Wash.). 

Shortly after, the Senate passed the resolution 52-46, with Democratic Sens. Jon Tester (Mont.) and Joe Manchin (W.Va.), and Independent Sen. Kyrsten Sinema (Ariz.), joining Republicans in striking down the plan. 

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“Let me make something really clear: I’m never going to apologize for helping working and middle-class Americans as they recover from this pandemic, never,” Biden said when he signed the veto on the resolution.

Biden’s student debt relief plan, however, still faces a significant hurdle: the conservative-majority Supreme Court, which may rule on the proposal as early as Thursday.

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