This Monday President Obama will be formally declaring his support for Senator Elizabeth Warren’s plan to allow students to refinance their private loans with the federal government.
Despite initial hesitation due to funding concerns, it seems that the President will “call for passage of the refinancing bill”, according to the Huffington Post.
What is the bill?
This website has previously done a full analysis on the pros and cons of the bill as well as its chances for passage. For those not familiar, it would allow students, who pass a minimal credit check, the chance to lower their private loan interest rates by refinancing with the federal government. Essentially, the government would enter into competition with other Private Loan Consolidation companies.
What does the Presidential support mean?
Unfortunately, it likely means very little. This bill already would have likely garnered plenty of Democratic support, and the Congressional Republicans won’t be in a hurry to vote for any law with the Obama stamp of approval.
From the student borrower point of view, the best thing about this bill is that it puts student loans back in the national discussion. After being nearly ignored in the most recent State of the Union, it is good to see that Obama has not forgotten about the 40 million Americans with student debt.
Student Borrower Reaction Tepid
Despite claims that their has been overwhelming support from student borrower groups, student loan message boards and discussion reaction seems to be far less enthusiastic. Most people realize that even if they were able to lower their interest rates, they still would be in trouble. In many ways it is the financial equivalent of bringing a knife to a gun fight. It may be better than nothing, but it probably won’t make much of a difference for many. If you are six figures in debt and unemployed, slightly lower interest won’t help your situation very much.
From this perspective, many student borrowers seem hesitant to support the bill. The value of the bill depends entirely upon how you look at it. Some might see it as a distraction, delaying discussion about the issues that really matter, such as restoring meaningful bankruptcy protection. Others might see it as a stepping stone necessary for more meaningful legislation.
Ultimately, the reaction probably doesn’t matter much, due to the bills low chance of passage. At the end of the day, this legislation amounts to playing politics in an election year, and student debtors are merely pawns in the game.