MADISON, Wis. — President Barack Obama’s announcement that he will seek expansion of income-based repayment for tens of millions of current student loan debtors is an important step in dealing with the national $1.2 trillion-and-rising student loan debt crisis, according to One Wisconsin Now.
One Wisconsin Now Executive Director Scot Ross commented, “Higher education ought to be the path to the middle class, not a multiple-decade debt sentence. Our original research shows how this vicious cycle is a clear and present danger not just for the finances of students and their families but to our national economy. We applaud President Obama for taking this crisis seriously and pushing for expansion of income based repayment for tens of millions of borrowers.”
Original research conducted by One Wisconsin Now’s education and research arm, One Wisconsin Institute, showed the devastating impact of student loan debt on the economy. The comprehensive financial survey of over 61,000 Americans revealed significant length of repayment terms and resulting impacts on economic activity:
- An average length of repayment for all those reporting student loan debt of 21 years, ranging from 17 years for those with some college but no degree up to 23 year for borrowers with graduate degrees;
- Rates of home ownership were 36% lower among individuals still paying on student loans versus those who have already paid off a loan across all income levels;
- For individuals reporting solid middle class incomes of $50,000 to $75,000, those still paying off their student loans report home ownership rates 28% lower than those in the same income range who have already paid off their loans. In the $75,000 to $100,000 income range loan payers home ownership rates were 25% lower non-payers;
- Across all income levels, individuals who have paid off their student loan are more likely to have purchased a new versus used vehicle in the last 10 years;
- For those currently repaying a student loan, over 63% purchased a used vehicle instead of a new vehicle;
- In a household with a family member repaying a student loan the last vehicle purchased was used for over 71%, versus new for just over 28%;
- The survey data suggests an aggregate impact of $6.4 billion in reduced new vehicle sales annually.
Ross commented, “These are people who took the responsibility to find a way to pay for their schooling, and, with hard work, earned a higher education. Not only are they now saddled with $1.2 trillion in debt, but they have to deal with a system that’s stacked against them. The President recognizes we have a crisis of college affordability and student loan debt and we call on federal and state governments across the country to take seriously this looming economic catastrophe.”
Ross added that additional work to solve the student loan debt crisis must include allowing refinancing of student loans, like is allowed with other loans such as mortgages, real state and federal tax deductions for interest paid on student loans, preventing tuition increases higher than the rate of inflation, allowing borrowers the same low interest rates that the big banks enjoy from the federal reserve, and expanding college aid for students who qualify.