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.