New York Republican proposes to slash student loan interest rates

With President-elect Trump set to return to the White House in January, the sun appears to be setting on the Biden administration’s student loan handout spree. 

But one moderate New York Republican still thinks Congress should act to ease the debt burden carried by borrowers. Rep. Mike Lawler, R-N.Y., introduced legislation this week that would slash the interest rate on federal student loans from 3.5% to just one percent.

“There’s no question that we have a student loan affordability crisis in this country,” Lawler told Fox News Digital in an interview. “And the bill that I’ve introduced would seek to address that legislatively by capping all student loan interest rates at 1%, including retroactively to really help address the affordability crisis by providing low interest student loans.”

Americans owe an estimated $1.74 trillion in federal student loan debt. President Biden had made a campaign promise to eradicate all that debt, but his various attempts to do so without an act of Congress were met with fierce opposition from Republicans and a handful of defeats in court. Earlier this year, a group of GOP-led states filed a lawsuit to halt Biden’s SAVE income-driven repayment plan, which is designed to make student loan payments more affordable and forgive accrued debt after 10 years of repayment.

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Republicans have described the Democratic president’s student loan forgiveness approach as an overreach of authority and an unfair benefit to college-educated borrowers, while others receive no such relief.

But Lawler says his proposal is distinct from student loan forgiveness since it would not put taxpayers on the hook for bailing out borrowers.

“The objective here is to really make sure that we are providing low interest rate student loans, but ultimately making sure that people who take out these loans are responsible to pay them back and not the taxpayer,” he said.

Lawler’s bill, called the Affordable Loans for Students Act, would retroactively apply a one percent interest rate adjustment to outstanding student loans. It would authorize the Department of Education to modify the interest rate and refinance these loans automatically, without requiring borrowers to opt in. The refinancing would not be mandatory and borrowers could opt out if they want to.

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President Biden speaks during an event in Madison, Wisconsin, on April 8, 2024.  (Daniel Steinle/Bloomberg via Getty Images / Getty Images)

Additionally, the bill would permit borrowers to consolidate some of their outstanding loans to simplify repayment under the new, lower interest rate.

Lawler said it is “critical” to ensure that federal loans are offered at a low cost to Americans.

“We shouldn’t be gouging students who are trying to get an education and ultimately contribute to our economy moving forward,” he argued. “We need a highly educated workforce. And college affordability has become a major impediment to that.” 

Asked if he was concerned that the availability of cheap federal loans would incentivize more borrowers to go into debt and have an inflationary impact on college tuition, Lawler said his proposal is just one of many needed reforms to higher education and the workforce.

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Melissa Byrne, We The 45 Million, joins student loan borrowers to demand President Biden use “Plan B” to cancel student debt immediately at a rally outside the Supreme Court of the United States on June 30, 2023, in Washington, D.C.  ( Paul Morigi/Getty Images for We The 45 Million / Getty Images)

He suggested that Congress should reevaluate how schools are accredited and expressed openness to taxing university endowments – a favorite idea of President-elect Trump’s, who has complained that colleges and universities lean too far left. Lawler also said there should be greater support for alternatives to a college education. 

“I’m a strong believer in vocational schools and the building trades and the need to have a pathway out of K-through-12 education to that. Not everyone is going to be going to college, but those that do certainly need to have an affordable pathway to get there. And I think we have seen over time the affordability crisis has exploded when it comes to higher education.” 

The Affordable Loans for Students Act is endorsed by the American Council on Education (ACE), the National Association of Student Financial Aid Administrators (NASFAA) and the American Association of Colleges and Universities (AAC&U), according to Lawler’s office.

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Lawler said he hopes to win bipartisan support for his bill in Congress.

” think this is an area where Republicans and Democrats, you know, can find consensus and agreement that we need to address the affordability crisis of higher ed and low interest student loans certainly is an avenue that we can find agreement on.”