MADISON, Wis. — President Obama today made a strong statement in favor of quick Congressional action to prevent federal student loan interest rates from doubling July 1st. One Wisconsin Now Executive Director Scot Ross praised the move, noting original research in Wisconsin by his organization demonstrates that the trillion-dollar student loan debt crisis is not just hurting students and their families but the entire economy.
Ross said, “We’re thrilled President Obama is making a strong stand to keep the trillion-dollar student loan debt crisis from becoming a two-trillion dollar crisis. Neither students and their families nor our economy can afford allowing federal student loan interest rates to double.”
Original research conducted by the One Wisconsin Institute found that student loan debt’s impact is not confined to students and their families, but is a significant drag on the entire state economy with:
- Graduates with Bachelor’s degrees reporting average monthly payments of $350 for an average term of 18.7 years;
- Economy-wide detrimental impacts of this debt including over $200 million in lost new auto sales every year; and
- Significantly lower rates of home purchasing and ownership among graduates earning solid middle class incomes but saddled with student loan debt.
Wisconsin’s Congressional Democrats have recognized the detrimental impact student loan debt has on the state economy. Recently Representatives Ron Kind, Gwen Moore and Mark Pocan cast votes against legislation that would have prevented students from being able to lock in interest rates for their loan, and instead allow rates to soar during the term of the loan. Wisconsin Senator Tammy Baldwin has also spoken out strongly in favor of taking immediate action to prevent the doubling of federal student loan interest rates on July 1st.
A 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%. The U.S. Federal Reserve has also raised concerns that rising levels of student debt pose a threat to economic recovery.
Ross concluded, “The trillion dollar student loan debt crisis is a clear and present danger to our economy. Allowing the crisis to continue unchecked, or make it worse by allowing student loan interest rates to skyrocket, is an unconscionable choice for anyone that truly cares about a middle class economic recovery.”