Swalwell, Warren: Seek to reduce student debts

As a standalone bill, Eric Swalwell’s No Student Loan Interest Act has just seven co-sponsors. And in a bid to prevent struggling borrowers from being crushed by large payments, the Education Department is proposing a new rule that would allow those with loans to cap monthly payments at 5% of their discretionary income. Unlike past income-driven repayment plans, this version would pay for the interest people owe, preventing their loan balances from growing as they make payments.

Canceling student debt hasn’t always been a primary goal of the Democratic Party. In 2014, Sen. Elizabeth Warren of Massachusetts sponsored a bill that would have allowed people with older federal student loans to refinance them at a lower rate — 3.86%, the rate set for undergraduate loans a year prior. Since 2013, Congress has tied the interest on student loans issued that year to the interest rate on 10-year Treasury notes. Many older loans have higher rates.

The bill failed in the Senate, where Republicans said it was a midterm election ploy that wouldn’t lower college costs or reduce spending. Conservative economists said lower interest rates would disproportionately benefit people who don’t need the help.

Some of those bills would also tackle interest rates. Sen. Sheldon Whitehouse (D-R.I.) and Rep. Joe Courtney (D-Conn.) introduced a bill earlier this year that would allow people to refinance their student loans at zero percent. Another bill from Sen. Marco Rubio (R-Fla.) would replace the interest rate on new loans with a one-time loan origination fee. Unlike the Swalwell proposal, however, neither of those bills would cancel the interest people currently owe on existing loans.

Swalwell credits Rep. Anna Eshoo (D-Menlo Park), one of his co-sponsors, with inspiring the bill. During one of their treks between Washington and their districts, Swalwell shared his experience with loans and Eshoo said her constituents often ask her what she thought the interest rate should be. She suggested it could just be zero.