——- ORIGINAL POST, THURSDAY, MAY 8, 2:12 P.M. ——-
Sen. Mark Udall
is one of 26 congressional sponsors backing the Bank On Students Emergency Loan Refinancing Act
, introduced by Sen. Elizabeth Warren
(D-Mass.) on Tuesday, May 6.
This bill is not a cure-all for the brutal student loan situation, as reported on in our May 7 cover story
, but it's a helpful step. The bill allows people with existing student loans to refinance their loans at the current interest rate. This is good for almost everyone with loans. The current interest rate for undergraduate Stafford loans is 3.86 percent, and for graduate loans 5.41 percent.
reported yesterday that these rates will go up by 0.8 percent next year, but 4.66 percent still beats 6.8 percent. It's a simple change, it's financially sensible, and after the bipartisan support for the student loan interest rate changes implemented last year, it sounds like this bill has a good chance of passing.
So here's why it's not going to pass as-is.
Section 3 of this bill adds a "Fair Share tax" to fund its execution. This tax, also called the Buffet rule for benevolent billionaire Warren Buffet
, would be levied on Americans with more than $1,000,000 in income. A press release from Udall's office states the Buffet Rule closes a tax loophole that allows millionaires and billionaires to pay less in taxes through charitable donations.
That's where the potential bipartisan support flies away. Sen. John Cornyn
(R-Tex.), the minority whip, did not wait for formal debate to begin to criticize the bill. According to a May 7 report from the National Journal
, Cornyn called the bill a Trojan horse for the tax. He says while his party is more than happy to talk about loan reduction, he feels the educational goals in this bill are just an excuse to raise taxes. In the Journal
story, Cornyn notes "Our economy grew at 0.1 percent [first quarter 2014]."
Mind, the gross domestic product in 2013 was $16.8 trillion, according to the International Monetary Fund. An 0.1 percent increase would mean the US added $16.8 billion to its economic output — a little more than the GDP of Rwanda ($16.4 billion), or well over that of Iceland ($13.2 billion). It's lower than last quarter's 2.6 percent growth, which was $437 billion, or more than the combined 2013 GDPs of Belgium and Iceland, but the US still added a small country's entire economic growth.
Still, even without the Buffet Rule, allowing student-loan holders to refinance at the current rate seems like a simple, helpful move. Udall says, "This common-sense bill would allow students to benefit from today's low interest rates and could amount to hundreds or thousands of dollars a year in savings."
To clarify, the Buffet Rule does not prevent millionaires from deducting charitable donations on their taxes. The Buffet Rule, as it's implemented in the Bank On Students Emergency Loan Refinancing Act, changes how charitable donations are deducted so people earning $1 million or more are not taxed at a lower rate than those who earn less than $1 million.