Should Borrowers Be Able to Refinance Their Federal Student Loans? (H.R. 1614)

What is H.R. 1614?

(Updated January 10, 2019)

This bill would change the interest rates for students borrowing through the William D. Ford Federal Direct Loan program, and allow borrowers to refinance their loans. Borrowers would be able to refinance their student loans at any time, which can potentially have the effect of lowering their interest rates and reducing their monthly payments.

Argument in favor

Allowing student loan borrowers to refinance their student loans will lower their payments and let them spend that money in other parts of the U.S. economy.

Argument opposed

Borrowers should know what they're getting into when they apply for the student loans — If interest rates were too high when they signed, they shouldn't have borrowed.

Impact

People who have borrowed student loans through the William D. Ford Federal Direct Loan Program, companies that service student loans, the Department of Education.

Cost of H.R. 1614

A CBO cost estimate is unavailable.

Additional Info

In-Depth: Sponsoring Rep. Mark Pocan (D-WI) introduced this bill to allow borrowers to refinance their federal student loans any time a lower interest rate is available:

“With college debt skyrocketing, Congress should be doing everything it can to help reduce the crushing burden of student debt. The Student Loan Refinancing Act will allow nearly 44 million Americans to refinance their student loans, just like a mortgage or car loan. This bill would bring down the long-term cost of a college degree.”

This legislation has the support of 50 cosponsors in the House, including 48 Democrats and two Republicans.

Of Note: Student loan debt is the largest form of personal debt in the U.S. surpassing $1.3 trillion among 38 million borrowers — with the average undergraduate facing $30,100 in debt. It has been linked with the sluggish housing recovery as borrowers can’t afford to make an investment in a home, in addition to declining sales of new cars.

Allowing students to refinance their student loans could come at a cost to the federal government -- as borrowers with good credit would be able to refinance with private lenders, leaving the government's portfolio with a larger proportion of borrowers who are unlikely to repay their loans. Through lost interest payments, this could cost the federal government billions of dollars.

Media:

• Sponsoring Rep. Mark Pocan (D-WI) Press Release
  
• The Badger Herald
  
• The Daily Cardinal
  
• Congressional Budget Office (Context)