MADISON, Wis. — A new report from the Consumer Financial Protection Bureau (CFPB) points to the need for significant reform to the student loan system, including allowing refinancing, according to One Wisconsin Now Executive Director Scot Ross. The CFPB report analyzed complaints from borrowers they received between October 1, 2013 and September 30, 2014 regarding their private student loans and found the plurality of complaints involved a dearth of repayment options.
“Student loan borrowers are working hard to get an education or job training and are taking on the personal responsibility to pay for it,” commented One Wisconsin Now Executive Director Scot Ross. “They’re not asking for a bailout, but this report adds urgency to the need for reform to ensure they are being treated fairly by lenders.”
Among the key findings in the CFPB report are:
- The largest number of complaints concerned the lack of options for borrowers to repay their loans;
- Borrowers with private loans have fewer options to modify their loans or make alternate payment options to avoid default than borrowers with federal student loans;
- Private lenders tend to refuse to help borrowers with other options to help them continue to make payments on their loans while experiencing financial hardships.
In October 2013, Rep. Cory Mason (D-Racine) and Sen. Dave Hansen (D-Green Bay) introduced common sense reforms including refinancing and a tax break for borrowers in their historic Higher Ed, Lower Debt Act. The legislation also requires borrowers to be given detailed information before entering into loan agreements and requiring the state to collect and disseminate information about private lenders and maintain a ranking system. Despite having 54 co-sponsors, Gov. Walker’s Republican allies killed the bill in the legislature.
Gubernatorial candidate Mary Burke has included provisions of the legislation, including allowing refinancing of student loans in her comprehensive economic plan. Meanwhile Gov. Walker, who records show has taken nearly $5 million in campaign contributions from the banking and finance industry, has refused to support the Higher Ed, Lower Debt Act.
Statistics from the federal government released earlier this year show there are over 800,000 borrowers in Wisconsin with federal student loan debt alone. In addition it was estimated that over 500,000 state borrowers would seek to refinance their student loans within the first 18 months of being allowed to do so.
“Getting a college education or job training has been the path to the middle class. This report sheds more light on how the $1.2 trillion student loan debt crisis is increasingly standing between hard working borrowers and the fair shot at the middle class that they’ve earned and the need for common sense reform like allowing you to refinance a student loan, just like you can a mortgage,” concluded Ross.