MADISON, Wis. — Massachusetts Senator Elizabeth Warren today announced new legislation, co-sponsored by Sen. Tammy Baldwin (D-WI), to allow borrowers with both federal and private student loan debt to refinance their loans to take advantage of lower interest rates. One Wisconsin Now Executive Director Scot Ross touted the growing momentum for common sense reform to the student loan system with this latest proposal to allow the refinancing of student loans.
“Allowing for the refinancing of student loans is a common sense, pro-consumer solution to help 40 million Americans with over $1.2 trillion in debt. Borrowers have done the right thing, working hard to get an education and taking on the personal responsibility of paying for it,” said Ross. “They aren’t asking for a bailout, but they’ve earned the right to be treated fairly.”
In addition to the bill announced by Sen. Warren today, Wisconsin Rep. Mark Pocan (WI-2) has introduced legislation to allow federal student loans to be refinanced and Rep. Ron Kind (WI-3) has called for allowing refinancing as part of his five-point plan to help students and borrowers. Reps. Gwen Moore (WI-4) and Tom Petri (D-6) have also introduced reforms to address the student loan debt crisis.
In the Wisconsin state legislature Rep. Cory Mason and Sen. Dave Hansen introduced the Higher Ed, Lower Debt Act (Assembly Bill 498 and Senate Bill 376) that would help Wisconsin borrowers refinance their student loans and extend a state tax credit to student loan debt payments. All 54 Democratic state legislators have co-sponsored the bill. Gubernatorial candidate Mary Burke has also included the bill’s refinancing and tax deduction provisions in her comprehensive jobs proposal.
According to the Consumer Financial Protection Bureau, federal student loan debt exceeds $1.2 trillion, burdening an estimated 40 million households. The Federal Reserve has found that student loan debt is now the second largest form of consumer debt in the country, more than credit cards and auto loan debt and exceeded only by home mortgage debt.
Original research by One Wisconsin Institute, conducted both nationally and in Wisconsin, found that student loan debt has a significant and negative impact on borrowers economic activity and the economy as a whole. Individuals with student loan debt are significantly more likely to rent versus own their home and purchase a used versus new vehicle.
Ross concluded, “Allowing borrowers to refinance their student loan, just like you can with a mortgage or an auto loan, is a common-sense, consumer reform that will help millions of Americans. Reforms like this are desperately needed if we are to keep the $1.2 trillion student loan debt crisis from becoming a full blown economic catastrophe and to give borrowers the fair shot at the middle class they’ve earned by working hard to get an education.”