WASHINGTON – Sen. Chuck Grassley (R-Iowa) and 14 fellow senators are urging the IRS and Treasury Department to make technical clarifications to rules on refinancing options for student debt amid the ongoing student debt problem. In a bipartisan letter to the agencies, the senators wrote that prior agency guidance on using non-profit bonds for refinancing was helpful. They sought further technical clarifications in several areas to implement the option further.
“We respectfully ask Treasury and the IRS to make clear the points provided above so that our state-approved programs can get to work providing more options and clarity to their borrowers,” the letter reads. “Empowering nonprofits operating in the student loan space is one of the many tools we should unleash to better deal with the student debt problem.”
A handful of for-profit lenders have dominated the refinancing of student loans to qualified borrowers. Grassley and fellow legislators have worked with the agencies to clarify that nonprofit lenders, including state-run or state-chartered organizations, can use tax-exempt bonds for student loan refinancing. Expanding the pool of lenders helps make more students and their families potentially eligible for refinancing student debt at lower interest rates via tax-exempt bonds.
The technical points requiring clarification include whether the refinancing of an original tax exempt-financed loan may be considered a refunding and what facts or circumstances are necessary to verify the compliance of the original loan with loan size limitations, the senators wrote.
The number of student loan borrowers has grown by 89 percent between 2004 and 2014, and the aggregate debt has tripled over that period to more than $1.3 trillion, the senators wrote.
In addition to Grassley, signing the letter were Sens. Jack Reed, Lisa Murkowski, Patrick Leahy, Joni Ernst, Amy Klobuchar, Todd Young, Elizabeth Warren, John Cornyn, Sheldon Whitehouse, Dan Sullivan, Richard Blumenthal, Maggie Hassan, Jeanne Shaheen and Edward Markey.
According to Forbes, student loan debt is now the second highest consumer debt category – behind only mortgage debt – and higher than both credit cards and auto loans. Statistics Forbes provided:
Total Student Loan Debt: $1.31 trillion
Total U.S. Borrowers With Student Loan Debt: 44.2 million
Student Loan Delinquency Or Default Rate: 11.2%
Total Increase In Student Loan Debt In 4Q2016: $31 billion
New Delinquent Balances (30+ days): $32.6 billion
New Delinquent Balances – Seriously Delinquent (90+ days): $31 billion
