President Barack Obama is calling on Congress to pass legislation that Democrats say will save people from drowning in student loan debt.
But the bill he wants Congress to pass would save borrowers about $1 a day, less than the going price for most candy bars.
On Saturday, Obama called on Congress to pass a Democratic bill allowing people to refinance their student loan debt. On Monday, he’s expected to reiterate that support, and announce the expansion of a program to help people minimize their monthly student loan payments.
“The good news is that Senate Democrats are working on a bill that would help more young people save money,” Obama said Saturday. “Just like you can refinance your mortgage at a lower interest rate, this bill would let you refinance your student loans.”
But the top Republican on the Senate’s education committee said Sunday that the Senate bill would raise taxes by $72 billion over ten years, just to deliver a benefit that amounts to $1 a day. Sen. Lamar Alexander (R-Tenn.) called on Obama to work with Republicans to find a more effective solution, just as the two parties did last year.
“Hopefully he will work that way again instead of joining Senate Democrats’ political stunt to give some former students a $1-a-day subsidy to help pay off loans while raising income taxes by $72 billion,” Alexander said. “Under existing law those students already can lower their monthly payments more than the Senate Democrats $1-a-day scheme would — without raising taxes and the debt.”
Alexander based his estimate of a $1 per day savings on a Congressional Research Service report, which said undergraduate student borrowers would save just $38 a month on their loan payment, slightly more than $1 a day. Graduate borrowers with $40,000 in loans would save $23 a day, and parent borrowers with $50,000 in debt would save $32 a day.
Alexander said the average undergraduate student has $21,600 in loans, while the average graduate has $27,000 in loans. He said best way to help students get out of that debt is to create the conditions for job creation.
“College graduates don’t need a $1-a-day taxpayer subsidy to help pay off a $27,000 loan,” he said. “They need a good job.”
The bill from Sen. Elizabeth Warren (D-Mass.) proposes to let people refinance their student loans at lower rates, and it would cost $51 billion over ten years. The cost of the bill is offset by a $72 billion tax increase on high-income earners, starting at incomes above $1 million per year.
Read the CRS’s report on loan refinancing here: