Whitehouse Introduces Zero Percent Student Loan Refinancing Legislation


The bill would allow Americans to refinance their federal student loans without paying interest – helping them escape a vicious cycle of debt

washington d.c. — Sen. Sheldon Whitehouse (D-RI) introduced the Zero Percent Student Loan Refinance Act, which would allow Americans to refinance their federal student loans at a zero percent interest rate. The bill would help borrowers repay the principal of their loans faster and ease a heavy burden for tens of millions of people in debt. Congressman Joe Courtney (D-CT) also introduced the bill in the House.

Large student loan interest payments can create a treadmill of debt that many Americans cannot escape. These interest payments often stand between borrowers and the financial freedom to focus on the future, whether that means buying a home, saving for retirement, or investing in their children.“, said Whitehouse. “This bill will help people pay off their loans faster and get on with their lives.”

Student loan debt is a huge burden for American families. According to Federal Reserve Bank of St. Louisstudent borrowers owed a total of $1.75 trillion to the federal government and private lenders as of April 2022. The average U.S. household with outstanding student debt owes $57,520 in loans, according to NerdWallet’s 2020 Household Debt Study. Student loan debt is also shared by a wide range of American borrowers, with 48 million Americans – or one in eight – having some form of student loan debt.

Unfortunately, many federal student loans continue to earn interest even during periods of deferment from school, hardship forbearance, and other periods when no payments are due. Additionally, borrowers repaying loans using an income-driven repayment plan may have a monthly payment that is too low to cover the interest accrued each month. As a result, their loan balance grows over time, even as they make payments. A joint 2021 report by the National Consumer Law Center and the Center for Responsible Lending found that 63% of student borrowers who made payments during the CARES Act payment pause owe even more now than they originally borrowed.

The Zero Percent Student Loan Refinancing Act:

  • Allow student borrowers to refinance their federal loans at zero percent — all FFEL, Direct, Perkins and Public Health Service Act eligible federal borrowers could refinance their high-interest loans down to zero percent through Dec. 31 2024.
  • Automatically refinance the debt of direct loan holders.

The full text of Whitehouse’s bill is available here.

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