Senator Sheldon Whitehouse, DR.I., presented a new bill earlier this month that, if passed, would allow Americans to refinance their federal student loans at 0% interest.
Whitehouse introduced the Zero Percent Student Loan Refinance Act, which would help borrowers pay off student debt without additional interest on their loans. Likewise, Rep. Joe Courtney, D-Conn., introduced the bill in the House of Representatives.
“Heavy student loan interest payments can create a treadmill of debt that many Americans cannot escape,” Whitehouse said in the June 2 press release. “These interest payments often stand between borrowers and the financial freedom to focus on the future, whether that’s buying a home, saving for retirement or investing in their children. This bill will help people repay their loans faster and get on with their lives.”
Student loan debt has increased in recent years, reaching about $1.75 trillion in federal and private student loan debt in June, according to the Federal Reserve Bank of St. Louis. About 48 million Americans, or one in eight, have some student loan debt, Whitehouse said.
While this bill impacts those with federal student loans, private student borrowers can also lower their interest rates through refinancing. Visit Credible to find your personalized interest rate without affecting your credit score.
BIDEN ADMINISTRATION CANCEL $5.8B IN STUDENT LOAN DEBT
Some borrowers struggle to repay their debts
Currently, federal student loans are subject to COVID-related forbearance and payments have been paused until August 31. During this period, borrowers are not required to make payments on federal student loans and their interest rates have been set at 0%. The Ministry of Education also halted collections on delinquent loans during this period.
But outside of this payment pause, some types of federal student loans accrue interest even during periods of school deferment, hardship forbearance, and other times when payments aren’t due. . And some borrowers who follow an income-driven repayment plan may even have a monthly payment that’s too low to cover the interest accrued each month.
In fact, a 2021 joint report from the National Consumer Law Center and the Center for Responsible Lending found that 63% of student borrowers who made payments during the aforementioned payment pause owe even more now than they originally borrowed.
But Whitehouse said this new bill would eliminate those interest rates, allowing borrowers to make their full payments toward their principal balance. This would allow student borrowers to refinance their federal loans at 0% for all eligible FFEL, Direct, Perkins and Public Health Service Act loans. The bill would allow refinancing until December 31, 2024. And it would also automatically refinance student loan debt for direct loan holders.
Although this bill does not reduce private student loan interest rates to 0%, they can be lowered through refinancing. Visit Credible to compare multiple lenders at once and choose the one with the best interest rate for you.
BIDEN SAYS HE PLANS TO CANCEL STUDENT DEBT, BUT NOT $50,000
Biden plans to cancel student debt
President Joe Biden has said he is considering canceling some student loan debt, but has not yet given an official decision on when or how much. He, however, said he would not write off the $50,000 student loan debt that some Democrats called for.
“I’m looking at facing some debt reduction,” Biden told reporters at the White House in May. “I am not considering a $50,000 debt reduction. I am carefully considering whether or not there will be additional debt reduction and will have a response on that in the coming weeks.”
Although the administration has yet to announce a decision on student debt cancellation, former White House press secretary Jen Psaki said Biden “will make a decision regarding any debt cancellation.” before the conclusion of this pause on student loans”.
Since taking office, the president has canceled $25 billion in student loans for borrowers eligible for certain programs such as civil service loan forgiveness or waivers related to borrower defense and school closures, according to Department of Education.
The student loan forgiveness only applies to federal borrowers, but those with private student loans can lower their payments through refinancing. To see if this is the right option for you, contact Credible to speak to a student loan expert and get all your questions answered.
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