A new bill from Senator Ben Allen (D-Santa Monica) would help California college graduates refinance their student loan debt with lower interest rate loans.
Allen’s SB 674, named the ReLIEF Act (Loan Improvement for Enhanced Futures), would be available to anyone with a bachelor’s degree who has maintained a steady job and kept up with his or her loan payments, whether public or private. Through the program, the State of California basically becomes the underwriter for the new, lower interest rate loans by providing a total of $25 million in first-lost protection to lenders. The money will come from California’s General Fund.
“There’s just crushing student debt out there and the debt continues to grow,” Allen said at a press conference with State Treasurer John Chiang, a gubernatorial hopeful, who is co-sponsoring the bill. “The average student debt rose by $10,000 over the past ten years.”
If the bill passes, the program will be administered by the California Educational Facilities Authority (CEFA), which is chaired by Chiang.
The expanded program will do nothing to decrease the amount of money students have to take out for college. The average cost of attending a UC has doubled over the last ten years, according to Chiang. The program can possibly save graduates several thousand dollars over the life of a loan by decreasing the amount of interest and lowering the monthly payment.
“Student loan debt is a toxin to the American dream,” Chiang said. Student loan debt is at roughly $1.3 trillion nationwide, an amount second only to mortgage debt.
The labor group Service Employees International Union is backing the bill.
An analysis of the bill from the Senate Committee on Education (which is chaired by Allen) noted the bill would take money away from other legislative priorities. For example, the Cal Grant program provides money to qualifying students for tuition, books, transportation, food and housing. The program is competitive – and there is currently not enough money to meet demand.
“The committee may wish to consider whether policy should focus on expansion of need-based aid programs or other types of financial assistance,” the report noted. The report did not note any opposition to the bill at this point.
The ReLIEF Act is not the only bill working it’s way through Sacramento to give college students some help. In March, Democratic Assembly members introduced a $1.6 billion program called Degrees Not Debt, that would help nearly 400,000 UC and CSU students pay for tuition and living expenses.