#InTheRed: A Path to Debt-Free College
U.S. Senator Debbie Stabenow believes that when hard-working students graduate college, they should get their fair shot at the American dream. Instead, many are saddled with crushing debt. Total student loan debt has now reached $1.3 trillion, and in Michigan the average student graduates with nearly $30,000 in debt. This makes it harder for them to make a down payment on a home or buy a car. Senator Stabenow wants to put Michigan students on a path for debt-free college, and the first step is to pass the Reducing Educational Debt (RED) Act.
Allow Borrowers to Refinance High-Interest Loans
For those just entering the job market at entry level positions, it can be nearly impossible to earn a salary high enough to keep pace with loan payments – especially when those loans have high interest rates. The RED Act would allow borrowers to refinance their student loans at lower rates offered to new borrowers in the 2013-2014 school year. That means rates of 3.86 percent for undergraduates, 5.4 percent for graduate students and 6.4 percent for parents. In addition, those who refinance their private loans will have access to the benefits and protections of the federal student loan program. At a time when interest rates are at near-historic lows, those with student loan debt should have the same ability to save as other kinds of borrowers. By refinancing under the In The Red Act, 24.2 million borrowers would be able to save an average of nearly $2,000.
Two Years of Free Community College
A community college degree opens the door to a lifetime of higher earnings, and so it is a tragedy when people who want to enroll cannot do so, purely because they can’t afford to pay the cost of tuition. The RED Act will make it possible to waive tuition fees for two years of community and technical college programs for eligible students. Every $1 invested by States to achieve this goal will be matched by $3 in federal funds. If every state participated in the program, some 9 million students would enjoy the benefits of free community college.
Increase Pell Grant Awards
The Pell Grant is one of the hallmarks of the American dream, making it possible for students from low- and moderate-income families to go to college, build a career and, eventually, achieve a standard of living that is better than their parents. In 2015 alone, Pell Grants put 8.2 million students on this track. But the majority of Pell Grant recipients still take out loans to pay the balance of the costs of their schooling. The In The Red Act will tie future Pell Grant increases to inflation, increasing the maximum award based on the Consumer Price Index. In 10 years, the maximum Pell Grant Award to a Michigan student would be $1300 larger than under current law.