Student Loan Fairness Act: Retroactive Rate Decreases

Student loans have become increasingly burdensome for millions of Americans, with high interest rates contributing significantly to ballooning loan balances over time. Many borrowers struggle to make payments and feel trapped by debt. While borrowers have a responsibility to pay back the principal amount they took out, the predatory interest rates on many student loans are unfair and make full repayment exceedingly difficult.

A policy solution is to retroactively reduce interest rates on all federal student loans to 0.9% for undergraduate loans and 1.9% for graduate loans. This would not forgive any principal debt that was borrowed, maintaining borrower responsibility. However, it would result in significant forgiveness of interest that has accrued over time at unreasonably high rates. For many borrowers, especially those with older loans who have paid a lot in interest already, this interest rate reduction would wipe out most or all of their current loan balance. The borrower will have effectively paid back the full amount they originally borrowed plus a small, reasonable amount of interest - but would be relieved of the unfairly high interest charges.

This policy threads the needle of maintaining the core principle that money borrowed should be paid back, while correcting for the predatory interest rates that have made loans balloon to many multiples of the original balance. It provides major relief to student borrowers by forgiving unfair interest, which in many cases will cancel out the majority of outstanding debt, without actually forgiving the valid principal balance. By making this change retroactive, it will help borrowers at all stages of repayment, including older Americans still paying off student loans from decades ago. The reduced interest rates are low but still above 0%, maintaining a nominal and reasonable interest charge.

This student loan interest rate reduction is a fair, principled, and effective way to relieve the burden of student debt by eliminating excess interest applied unfairly over time, while still maintaining responsibility for repayment of money borrowed.

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