BOSTON (AP) -- U.S. Sen. Elizabeth Warren filed a bill Tuesday she said would let millions of college graduates with existing federal student loans refinance those loans at the lower interest rates now offered to new borrowers.
Backers of refinancing legislation said recent grads can face interest rates of 12 percent or more while students taking out new undergraduate loans pay a much lower rate of 3.86 percent.
Warren said the nation's $1.2 trillion in student loan debt is "crushing young people and dragging down our economy."
The Massachusetts Democrat would pay for her proposal with a tax increase on wealthy Americans using the so-called "Buffet rule," which would ensure that anyone making more than $1 million per year pay at least the same rate as middle-income taxpayers.
"Allowing students to refinance their loans would put money back in the pockets of people who invested in their education," said Warren, who has made student debt a key element of her work in the Senate.
The bill is co-sponsored by more than 20 fellow Democratic senators.
Massachusetts U.S. Rep. John Tierney joined with fellow Democrat, California Congressman George Miller, to file a similar bill in the House.
"Homeowners and businesses are often able to refinance their debts. Students should be able to do the same," Tierney said.
Tierney said a graduate who borrowed the national average of around $30,000 through unsubsidized federal loans to pay for their undergraduate education would save more than $4,000 in interest payments by refinancing under the bill.
Nearly 40 million Americans are working to repay student loans, he said.
The bill would let student loan borrowers with public or private loans who borrowed before 2013 to refinance their loans at the lower market-based rates established by Congress last year.
Loans borrowed for undergraduate education would be refinanced to 3.86 percent, loans borrowed for graduate education would be refinanced to 5.41 percent and loans borrowed by parents for their child's education would be refinanced to 6.41 percent.
Tierney is facing Democratic and Republican challengers in his re-election campaign for the state's 6th Congressional District seat.
His GOP rival, former state senator Richard Tisei, said student loan debt has soared during Tierney's time in office and that a sluggish economy has made it harder for those graduates to find good jobs to pay off their debt.