Student Loan Refinancing Bills

[k12balla]

Currently there are a couple of bills in congress under review which could have a significant impact on students looking to pay down their debt and their cumulative interest:

http://bigstory.ap.org/article/some-proposals-tackling-student-debt

Sen. Warren and Sen. Gillibrand both propose bills to enable students to refinance their loans to 3.8 or 4% respectively. I definitely encourage writing to our local representatives to support these two bills, however, I was wondering if anyone had any updates on where they stand, or if it is likely that either of them will be passed.

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[sazerac]

Meh these bills are a dime a dozen and generally have major effects positive or negative on what student loans would be like. Most of these bills go nowhere, including the one to limit PSLF to $57K that got everybody's panties in a bunch a month ago.

If you want to look at a really terrifying proposal, check out the (proposed) tax reform act of 2014:

http://waysandmeans.house.gov/uploa...form_act_of_2014_discussion_draft__022614.pdf

search for the phrase "discharge" and weep. It proposes to eliminate the student loan interest deduction and proposes to treat all forgiven loans (including PSLF) as taxable income. Tax bombs for everybody! This is basically the exact opposite of that $57K bill, which proposes to eliminate tax bombs for everybody.

It is unlikely any of these bills will go anywhere. American politics is much more reactionary and more about kicking the can into the next election cycle, than it is forward thinking. I'm still curious if anything will be reformed before the lucky first round of folks get their loans PSLF forgiven 100% tax free in 2017.

 

[Perrotfish]

Meh these bills are a dime a dozen and generally have major effects positive or negative on what student loans would be like. Most of these bills go nowhere, including the one to limit PSLF to $57K that got everybody's panties in a bunch a month ago.

There was no bill to eliminate PSLF a month ago, those were the department of education's recommendations for Obama's budget proposal for 2015 and therefore hasn't yet been proposed or debated. Bills to end repayment options also aren't a 'dime a dozen', and its not like the ones that are proposed never pass. New programs come into existence all the time (PAYE and PSLF are both relatively new) and bills also pass that make student debt worse all the time (the interest rate changed twice when I was in Med school, and before that we lost the ability to refinance loans or discharge them in bankruptcy).

There is no reason to think that the law won't drastically change next year just like the law drastically changes every other freaking year.

 

[coolraz]

I served on several councils for the American Dental Association, one of which was the Council on Goverment Affairs which kept a very close pulse on legislation, including student loan reform/taxation. I can tell you that there is NO chance that a meaningful refinance/reform bill that will HELP students is going to happen. Why? Because it's a cost. The way the goverment works now is that if you're passing something that doesn't have a offset somewhere (either a spending cut or an increase in revenue) it will NOT go anwyhere. The only legislation going through are things that are regulatory in nature (hopefully McCarran Ferguson repeal for example, and some other insurance related things). The bottom line is that if student borrowers are allowed to refi their loans it would create a BIG shortfall in the budget (because the budget is drawn up based on the crazy 7-9% rates we currently have) and there's really nothing to offset it with. For what it's worth, there's some good opportunities now to refinance through private banks. One of those I helped create actually (just find my earlier post on the refi).

 

[georgenelson]

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