The Zero-Percent Student Loan Refinancing Act was introduced by Senator Sheldon Whitehouse (D-RI) along with Congressman Joe Courtney (D-CT). The act would give Americans the option to refinance their federal student loans with a zero percent interest rate, according to a press release.
The intentions of the bill would be to help borrowers pay their principal on their loans faster and reduce the stress for many people burdened with loans, the release says.
“Big student loan interest payments can create a treadmill of debt that many Americans can’t escape. Those interest payments often stand between borrowers and the financial freedom to focus on the future, whether it’s buying a home, saving for retirement, or investing in their children,” said Whitehouse. “This bill will help people pay off their loans more quickly and get on with their lives.”
As of April 2022, $1.75 trillion was owed to the federal government and private lenders, according to the Federal Reserve Bank of St. Louis.
Nerdwallet’s household debt study back in 2020 says the average household owed $57,530 in outstanding debt.
Currently, federal student loan interest accrues even while loans are deferred when you’re enrolled in school, in times of hardship forbearance, and when payments are not do. Another problem the press release continues to mention is income-driver repayment plans. Monthly payments may not be enough to cover the interest which can trap borrowers as their loan increases in debt.
According to a 2021 joint report by the National Consumer Law Center and the Center for Responsible Lending reveals that 63% of borrowers making payments during the CARES Act payment pause have more debt then when they originally accepted the loans.
This Zero-Percent Student Loan Refinancing Act would allow students the option to refinance eligible federal FFEL, Direct Perkins, and Public Health Service Act student loans to zero percent until December 31, 2024.