Senate Examines Student Loans

Comments Off on Senate Examines Student Loans
June 5, 2014 · by mlivolsi · Spark Notes

Prepared by:  Wes Huffman (

June 4, 2014

Today, there were two hearings on student loans going on simultaneously in the Senate.  The Senate Banking Subcommittee on Financial Institutions and Consumer Protection was titled, “Student Loan Servicing:  The Borrower’s Experience” and the Senate Budget Committee Hearing was titled, “The Impact of Student Loan Debt on Borrowers and the Broader Economy.”   These hearings were convened as part of the run-up to Senate consideration of the “Bank on Students Emergency Loan Refinancing Act,” but covered a range of topics.  Summaries are attached with this Spark.

Following the hearings, Sen. Elizabeth Warren (D-MA) took to the Senate Floor to announce the introduction of a new version of the legislation, S. 2432.  The legislative text is not yet available, but relatively small changes are expected with this new iteration.  Reports indicate the new version will be more generous to borrowers, particularly in terms of the rate on consolidation loans.  It is also likely to eliminate the origination fee for these loans. 

Previous reports had suggested this new version may not include provisions – Privacy Policy – Terms of ServiceThe content on this page is viewed on a tablet or desktop computer. for the refinance of private student loans.  However, a budget score from the Congressional Budget Office (CBO) and Joint Committee on Taxation (JCT) indicates the conversion of private student loans to federal student loans provides a significant level of savings which helps pay-for the legislation.

The budget score from CBO and JCT on the original legislation, S. 2292, indicates the bill will cost the government $19 billion in the first five years, but save $22 billion over 10 years.  Importantly, these calculations were performed under accounting prescribed by the Federal Credit Reform Act (FCRA).  CBO and many others have cautioned that FCRA accounting does not properly account for risk in federal credit programs and greatly underestimates their cost (or overestimates their savings) for the federal government. 

The CBO/JCT score on S. 2292 is available online: