MADISON, Wis. — Calling it a “clear and present danger to our state’s economy,” One Wisconsin Institute Executive Director Scot Ross briefed state legislators on the dramatic, negative impact of the trillion-dollar student loan debt crisis on Wisconsin’s economy. Joining Ross at the briefing, hosted by ranking Democratic members of the Senate and Assembly Higher Education committees Jen Shilling and Janet Bewley, was national Campus Progress Director Anne Johnson.
Johnson commented, “While Congress is getting ready to debate interest rates on new student loans, there are millions of borrowers already dealing with student debt. So many young graduates are facing student debt and when they delay major purchases like buying a home or car, it has a real impact on the economy.”
“We’re reaching out to engage legislators to join our fight on the trillion-dollar student loan debt crisis. One Wisconsin Institute’s first of its kind, state-specific research confirms that this is not an issue just for students and their families, but is critical for the economic recovery we all want and need in Wisconsin,” said Ross.
According to One Wisconsin Institute’s analysis of a detailed financial survey of nearly 2,700 Wisconsin residents across income and age levels, over one-third of persons with bachelors or advanced degrees were making student loan payments. The research further revealed:
- Individuals with bachelors degrees reported making an average monthly student loan payment of $350 and those with graduate or professional degrees made an average payment of $448;
- The length of student loan debt was nearly 19 years for persons with bachelors degrees and over 22 years for those with graduate or professional degrees;
- An increasing reliance on private student loans versus government loans and an increasing number of individuals consolidating their loans, therefore extending the repayment period and total amount paid, post-1996 Student Loan Marketing Association Reorganization Act;
- Individuals paying on a student loan are more than twice as likely to purchase a used versus new automobile;
- Annual aggregate new vehicle spending may be reduced in Wisconsin by up to $201.8 million;
- A strong correlation between student loan debt and renting with 85.6% of renters with household incomes between $50,000 and $75,000 currently paying on a student loan.
A recent report by the Federal Reserve Bank of New York confirms the Wisconsin survey findings. In it, the researchers report, “growth in student loan balances and delinquencies was accompanied by a sharp reduction in mortgage and auto loan borrowing.” In addition, it was revealed that student loan debt is the second largest consumer liability, exceeded only by mortgage debt, the number of borrowers and borrowers’ debt has risen 70% since 2004 and loan delinquency rates exceed 30%.
Ross concluded, “If we fail to act, the one trillion dollar student loan debt crisis will soon become the two trillion dollar student loan debt crisis. Hopefully the research we presented and the discussion we had today will spur legislators to not only take critical first steps like freezing UW System tuition, but to go even further and ensure that higher education can once again be the path to the middle class and a stronger economy, not a sentence to a lifetime of debt.”