MADISON, Wis. — Today President Barack Obama announced new initiatives to help the estimated 40 million plus Americans currently burdened with over $1.2 trillion in student loan debt. An executive action signed by the President directs the Department of Education to allow more federal student loan borrowers to enroll in a program allowing them to make monthly loan payments of 10 percent of their monthly income.
The President also formally backed a proposal authored by U.S. Sen. Elizabeth Warren, and sponsored by Wisconsin Senator Tammy Baldwin, to allow borrowers to refinance their student loans, just like you can with other loans like a mortgage or car loan. According to a fiscal analysis of the refinancing bill, it is estimated that 20 million borrowers would seek to refinance their loans within 18 months.
Original research from One Wisconsin Institute on the issue found borrowers reporting multi-decades long loan terms and significant monthly payments. On average borrowers reported student loan terms of over 20 years and monthly payments of nearly $500 per month. The economic effects of this debt ripple across the economy, including the critical housing and auto markets. According to the Institutes research, borrowers are much more likely to rent versus own their home and purchase a used versus new vehicle than their peers without student loan debt.
The following are the statements of One Wisconsin Now Executive Director Scot Ross on President Obama’s announcement today:
“Student loan debt is standing between millions of Americans who took on the personal responsibility of paying for their education and the fair shot at the middle class that they’ve earned with their hard work. And it is a clear and present danger to our entire economy.
“Allowing millions more borrowers to base their monthly payments on their income will help them keep up in repaying their loans. And endorsing legislation to allow student loans to be refinanced like every other commercial loan is a simple, common sense way to help take on the $1.2 trillion economic albatross of student loan debt.
“President Obama’s actions today renew hope that we can and will change the system to treat borrowers fairly and make sure higher education and job training remain a path to the middle class instead of a multi-decade debt sentence.”