King Introduces Legislation to Ease Burden of Student Debt, Empower Borrowers, Stimulate Economy

Press Release

U.S. Senator Angus King (I-Maine) joined Senators Mark Warner (D-Va.) and Jon Tester (D-Mont.) to introduce legislation that provides additional financial flexibility to borrowers struggling to get a better handle on their student debt during the COVID-19 crisis and beyond. This legislation allows for borrowers to refinance their loan under certain conditions, to give them a higher standard of living and spending power. King, Warner and Tester are introducing this legislation as student debt in the U.S. is surpassing $1.7 trillion -- all while an increasing number of borrowers find themselves unable to pay back their loans due to job scarcity and other extraordinary financial circumstances caused by the COVID-19 health and economic crisis.

"The coronavirus pandemic has hit our economy hard -- and that's a major problem for the millions of Americans who took out student loans to invest in their future," said Senator King. "As the coronavirus pandemic's economic fallout continues to unfold, Congress needs to take steps to help these young people have added flexibility and options to meet these obligations. Our legislation provides paths to help get this debt under control -- if enacted, it can improve financial prospects for these borrowers while also supporting the overall health of the American economy."

The Coronavirus Emergency Student Loan Refinancing Act of 2021 would ease the burden of the student debt crisis by:

Allowing student loan borrowers to refinance their federal student loans as long as they are in good standing and meet eligibility requirements based on income or the debt-to-income ratio established by the Department of Education. Under the legislation, borrowers would be able to apply to refinance their Direct Loan or Federal Family Education Loan (FFEL).
Giving borrowers the option to refinance their federal student loans at lower interest rates to the lowest yield of the 10-year Treasury note in the preceding six months, plus a fixed percentage rate established by the Student Loan Certainty Act of 2013.
For undergraduate borrowers with Federal Direct Stafford, Unsubsidized, PLUS, and Consolidated loans, the interest rate would be equal to the lowest yield on the 10-year U.S. Treasury note in the preceding six months plus 2.05 percent;
For graduate borrowers with Federal Direct Stafford or Unsubsidized loans, the interest rate would be equal to the lowest yield on the 10-year U.S. Treasury note in the preceding six months plus 3.6 percent; and
For borrowers with PLUS loans, the new interest rate would be equal to the lowest yield on the 10-year U.S. Treasury note in the preceding six months plus 4.6 percent.
Bill text is available here. A one-page summary is available here.

Since the early days of the coronavirus pandemic, and onset of related financial hardships, Senator King has advocated for student loan borrowers. In October, he urged then-Secretary of Education Betsy DeVos to ensure all struggling federal student borrowers can gain access to crucial federal relief. In July, he urged the Administration to end the seizure of tax refunds from federal student loan borrowers in default and refund any payments seized in direct violation of federal law. This seizure of tax refunds, known as a tax offset, violates a provision in the CARES Act that suspended the collection of all federally held defaulted student loans until September 30, 2020 -- which was intended to provide relief to student loan borrowers experiencing financial strain during the coronavirus crisis and subsequent economic fallout.

Senator King was a sponsor of the landmark Bipartisan Student Loan Certainty Act, which was signed into law in 2013 and has lowered student loan interest rates for all students who have taken out a loan after July 1, 2013. The law has helped American students and families save tens of billions of dollars.

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