Elizabeth Warren wants student loan refinancing now.

Student loan debt: Election issue of the year?

Last month, we told you about U.S. Sen. Elizabeth Warren’s plan to cut college kids a break on student loan debt. It would allow them to refinance at a lower interest rate — at a total estimated cost of $60 billion.

Last week, Congress blocked that plan, called The Bank on Students Emergency Loan Refinancing Act. And not just because “BSELRA” is a lame acronym that Warren (D-Mass.) could’ve replaced with something better — like the Screw Millionaires And Limit Loans Delaying Economic Boom Time Act, aka “SMALLDEBT.”

Republicans didn’t want to even debate the student loan refinancing bill because of how it would pay for itself — with the Buffet Rule, which Democrats have been trying to pass for a few years now. If you’ve never heard of it, The New York Daily News summed it up nicely in 2012…

The Buffett Rule is a proposal from the Obama administration to keep millionaires and billionaires from paying federal taxes at a lower rate than middle-class people. The initial proposal would have made people who earn $1 million or more per year in wages and investments pay at least 30 percent of their income in federal taxes.

Democrats call it making the rich pay their fair share. But in a Senate where they hold only a slight majority, that’s what the political class would call a “non-starter.” It’s why The Associated Press dubbed the bill’s failure “a pre-ordained outcome.”

The proposal was blocked from discussion in a 56-38 vote. For arcane reasons, Senate rules require 60 votes, not 51. 

Of course, Republicans argue the bill wasn’t about loans at all, but just another gimmicky attempt to raise taxes. If they got the chance to rename Warren’s proposal, it might be called the Affordable Structuring to Compensate Indebted Struggling Students (ASCISS) Act. Senate Minority Leader Mitch McConnell (R-Ky.) told the AP: “The Senate Democrats’ bill isn’t really about students at all. It’s really all about Senate Democrats. They want an issue to campaign on to save their own hides this November.”

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Real problem, campaign issue, or both?

Collectively, Americans hold more than $1 trillion in student loan debt. The latest Federal Reserve report says 11.5 percent of them are three months behind on paying or in default. And when you’re in default, the government just starts sucking money out of your paycheck through a process called wage garnishment. The Wall Street Journal says it’s happening 40 percent more often than it was a decade ago, and affected 175,000 people last year.

If you have student loan debt, you probably don’t want to hear about political games — you want action. That’s also true for thousands of young adults who sent questions to President Obama through Tumblr for a student loan summit, according to Daily Beast writer Kelly Williams Brown

A few days ago, Tumblr reached out to me: They were having a Q&A with the president about student loans. Could I, along with a few other Tumblr users, help cull through the questions and select some? […] The first few I read made my shoulders slump, but by the 400th, I’d hardened up. They began to feel less like sad aberrations and more like an accurate read on what it means to be a young person in this country. […] One began this way: “I’m currently worth more dead (with my life insurance policy) than alive (with my student loan debt).” Another writer said she became disabled during her college years, and went on SSDI. Her loan, worth $57,000, is now in default, and she is curious whether her disability payments will be cut as a result. One said simply, “Why do I have to make a life-changing decision of what job I’ll have for the rest of my life when only a week prior I had to ask to use the bathroom?”

Obama is pretty limited in what he can personally do for these kids. He did just expand one of a handful of government programs to help with student loans. It’s the one called Pay as You Earn, and NPR explains it well…

 [It] limits borrowers’ monthly debt payments to 10 percent of their discretionary income. Under the program, loans don’t just get less expensive; they can actually disappear. The balance of a loan is forgiven after 20 years — 10 years if the borrower works in public service (for government or a nonprofit). With the announcement, Obama extends eligibility for the program to an older group of borrowers: those who borrowed before October 2007 and have not borrowed since October 2011.

The expansion will make an additional 5 million Americans eligible, and could knock more than $100 off monthly payments for some, according to the White House. Unfortunately, NPR also notes that many people who were already eligible haven’t signed up — 1.6 million out of possibly 37 million.

They either haven’t heard about it — it’s certainly not being promoted on the same scale as Obamacare — or they find that student loan servicers purposefully make it difficult to sign up.

That’s one of many problems people have with servicers. The largest, Sallie Mae, was recently fined $97 million for overcharging military service members and hitting them with unfair late fees. According to a recent Consumer Financial Protection Bureau report, 19 percent of all complaints about student loans are actually about the servicers handling them — the second largest category after the “paying them” problem.

There are obviously a lot of real problems with student loans. Interest rates and how servicers operate are two pieces of the puzzle, but this Congress isn’t equipped to deal with even that much. They couldn’t keep the federal government open for two weeks last year, remember? But Republicans are surely right that Warren and others will campaign on this. They already are, says Greg Sargent of the Washington Post

[Friday,] Elizabeth Warren blasted out a fundraising email to her list of supporters on behalf of Alison Lundergan Grimes.

“Make no mistake about who blocked our student loan bill,” Warren’s missive reads. “Mitch McConnell told his party to turn a blind eye to the 40 million people all across the country who work hard, play by the rules, and now find themselves just getting crushed with student loan debt. Why? Because he didn’t want to close the tax loopholes for millionaires and billionaires to pay for the bill.”

One under-the-radar issue that could gain traction in several Senate races is student loans — framed on Warren’s terms, as a battle between those who prioritize protecting the wealth of billionaires and those who want to help ordinary Americans still struggling under crushing debt in the wake of the Great Recession.

If there’s anything that gets politicians motivated, it’s an election year. So Congress: Let’s talk debt.

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