Sen. Chuck Grassley, R-Iowa, and a group of 14 other senators from both parties are asking the Internal Revenue Service and the Treasury Department to clarify their rules to enable more lenders to refinance student loans.
In a letter last week, the lawmakers wrote that previous guidance from the IRS and the Treasury on using nonprofit bonds for refinancing had been helpful, and they asked for more technical clarifications on how to take the option further. They noted that a handful of for-profit lenders have dominated the refinancing of student loans to qualified borrowers. Nonprofit lenders, including those chartered by the states, can use tax-exempt bonds for student loan refinancing. The lawmakers contend that 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.
They asked for more clarification about technical points such as whether the refinancing of an original tax exempt-financed loan could be considered a refunding and what facts or circumstances would be needed to verify the compliance of the original loan with loan size limitations.
“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 senators wrote. “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.”
The number of student loan borrowers has grown by 89 percent between 2004 and 2014, the lawmakers noted, and the aggregate debt has tripled over that period to more than $1.3 trillion, the senators wrote.
In addition to Grassley, other senators signing the letter included Senators Jack Reed, D-R.I., Lisa Murkowski, R-Alaska, Patrick Leahy, D-Vt., Joni Ernst, R-Iowa, Amy Klobuchar, D-Minn., Todd Young, R-Ind., Elizabeth Warren, D-Mass., John Cornyn, R-Texas, Sheldon Whitehouse, D-R.I., Dan Sullivan, R-Alaska, Richard Blumenthal, D-Conn., Maggie Hassan, D-N.H., Jeanne Shaheen, D-N.H., and Edward Markey, D-Mass.
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