MADISON, Wis. — Today marks the two-year anniversary of student loan debt in the United States reaching $1 trillion, and it’s no cause for celebration. According to One Wisconsin Now Executive Director Scot Ross student loan debt has exploded in recent years as borrowers and their families have been increasingly squeezed by skyrocketing tuition, cutbacks in public investment in higher education and job training and profiteering by big banks and the federal government.
Ross commented, “The two-year anniversary of student loan debt hitting $1 trillion in the U.S. ought to be a clarion call to action. If we allow this crisis to continue to grow unchecked it will most certainly become a full-blown economic catastrophe.”
According to an original state research survey from One Wisconsin Institute, individuals with bachelors degrees reported making an average monthly student loan payments of $350 and those with graduate or professional degrees made an average payment of $448. Borrowers reported the length of their student loan debt repayment was nearly 19 years for persons with bachelors degrees and over 22 years for those with graduate or professional degrees.
The Institute’s research also found this debt has significant, negative consequences not just for borrowers, but also for the entire state economy. Individuals paying on a student loan are more than twice as likely to purchase a used versus new car, and annual new vehicle spending may be reduced in Wisconsin by over $200 million. There is also 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.
Noting that student loan debt now exceeds all consumer debt in the U.S. except home mortgage loans, Ross commented, “How can you have a vibrant middle class when the best path to get there, higher education, is becoming a multi-decade debt sentence?”
According to the U.S. Federal Reserve there are over 750,000 borrowers in Wisconsin with federal student loan debt alone, with many more paying back private loans. In response to the growing crisis in Wisconsin, State Representative Cory Mason and Senator Dave Hansen introduced the Higher Ed, Lower Debt Act (2013 Senate Bill 376 and Assembly Bill 498). The bill offered an innovative approach that would provide tax breaks to borrowers in repayment and allow refinancing of student loans.
In addition, Democratic gubernatorial candidate Mary Burke has included provisions of the Higher Ed, Lower Debt bill in her jobs plan. In Washington, U.S. Rep. Mark Pocan has championed a bill that would allow refinancing of federal loans, allowing borrowers to obtain the lowest interest rate available, instead of a federally mandated one, and just yesterday, U.S. Rep. Ron Kind outlined a new five-part plan for dealing with student loan debt.
“Borrowers have done right thing. They worked hard to get their education or job training and they took on the personal responsibility of paying for it. They aren’t asking for a handout, but they deserve a system that treats them fairly and gives them the fair shot at the middle class they’ve earned with their hard work,” concluded Ross.