WASHINGTON, D.C. – Today, U.S. Sen. Sherrod Brown (D-OH) applauded an executive order by President Obama that would cap the monthly cost of federal student loans to just 10 percent of a borrower’s income, benefitting more than five million Americans. Brown also urged Congress to pass legislation he is cosponsoring that would enable more than 1.2 million Ohioans to refinance their private and federal student loans to lower interest rates currently offered to new borrowers.
“Education has always provided Americans the opportunity for a middle-class life and financial security,” Brown said. “But an entire American generation is struggling with the weight of student loan debt, unable to start businesses, purchase homes, and contribute to their families and communities. Providing students reasonable caps on their federal student loan payments—and the opportunity to refinance their loans to lower rates—is both the right thing to do and the right way to strengthen our economy.”
Beginning December 2015, the Administration will direct the Secretary of Education to cap payments of federal direct loans to 10 percent of a borrower’s monthly income. These payments will be set on a sliding scale based on income, and any remaining balance will be forgiven after 20 years of payments. For those in public service jobs, remaining balances will be forgiven after 10 years of payments.
Brown is also working to pass the Bank on Students Emergency Loan Refinancing Act, which would benefit nearly 1.2 million Ohioans. Many borrowers with outstanding student loans have interest rates of nearly seven percent or higher for undergraduate loans, while students taking out new federal undergraduate loans pay a rate of 3.86 percent under the Bipartisan Student Loan Certainty Act passed by Congress last summer. The Bank on Students Emergency Loan Refinancing Act would allow students to pay back their outstanding loans at the same rates that Senate Republicans overwhelmingly embraced last summer for new borrowers.
There are nearly 40 million Americans with outstanding student loans. Brown’s legislation could lower payments for millions of those individuals by hundreds or thousands of dollars a year. The average student loan debt among those who borrow to earn a bachelor’s degree is nearly $30,000—and 30 percent of Federal Direct student loan dollars are in default, forbearance, or deferment. Meanwhile, the Government Accountability Office (GAO) recently projected that the government will bring in $66 billion in revenue on its federal student loans made between 2007 and 2012. This legislation is fully funded by enacting the Buffett Rule, which would limit special tax breaks for the wealthiest Americans that allow millionaires and billionaires to pay lower effective tax rates than middle class families.
Brown continues his fight to ensure Ohio’s students can receive an affordable college education. Last week, Brown announced a new plan aimed at preventing families of deceased student loan borrowers or co-signers from being harassed by lenders. The announcement followed a hearing Brown chaired of the Senate Banking Subcommittee on Financial Institutions and Consumer Protection that examined the often troublesome relationship between student loan servicing companies and borrowers.
In April, Brown hosted his seventh annual Ohio College Presidents Conference—the first of its kind for College Presidents in Ohio—to bring together leaders from two-year, four-year, private, public, and community colleges to discuss shared challenges and goals for students and institutions of higher learning. This year, 42 Ohio college presidents attended the forum to discuss ways to make college affordable and accessible for all Ohio students.