ORLANDO, Fla. – Sen. Bill Nelson (D-Florida) met with recent graduates in Orlando Wednesday afternoon to unveil legislation he's planning to introduce that aims to reduce student loan interest rates and allow borrowers to refinance existing student loans.
The bill, which Nelson plans to file next week, would cap rates for undergraduates at 4 percent, graduates at 5 percent and for parents of undergraduates at 6 percent. The law currently caps the rates at 8.25 percent for undergraduates and between 9.5 and 10.5 percent for graduates, Nelson said.
“If we really want to make higher education more accessible in this country, we have to make it more affordable,” Nelson said in a news release. “If you can get a home loan at 4 percent, why can’t students get an education for the same rate?”
Nelson announced his plan less than a week after the federal government increased federal student loan rates from 3.76 percent to 4.45 percent.
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Under current law, existing borrowers can't refinance their loans for lower rates once they are set. Nelson's office said that students who took out loans between July 1, 2006, and July 1, 2013, likely have a fixed rate of 6.8 percent and will have to keep that rate for as long as they're making payments, even though the rates have since fallen.
Nelson's bill, if approved, would allow borrowers to refinance once in their lifetimes for a lower rate.
"Loan origination fees" would also be removed under Nelson's legislation. That fee is generally taken out of a student's loan before they receive it, but the student is still responsible for paying back the full amount.
Nelson said he plans to file his bill when Congress returns from recess next week. Recent graduates who attended Nelson's roundtable on Wednesday discussed their student loan debt and said they would support legislation that would lessen the burden.