MADISON, Wis. — Student loan debt is skyrocketing across generations and, according to newly released research by the Federal Reserve Bank of New York, is a key component of a surge in the debt held by Americans between the ages of 50 and 80. Economists found that while debt like mortgage and automobile loans and credit cards held steady, a near doubling of student loan debt was a key driver in a 60 percent jump in the debt load of Americans nearing or in their retirement years between 2003 and 2015.
“Student loan debt is a multi-generational economic crisis, burdening young people who’ve just graduated from college and threatening the retirements of people who have worked hard their entire lives,” said One Wisconsin Now Executive Director Scot Ross. “The system needs real reforms, and they need to help alleviate this crisis not just for current students and recent graduates, but also borrowers in their 50s, 60s and beyond.”
Original research by One Wisconsin Institute found that student debt in Wisconsin was directly responsible for at least $200 million in lost new vehicle sales every year and that households with student debt were far more likely to rent, versus own, their home.
Additional negative economic impacts result as older individuals reach retirement age with student debt. A media report on the New York Fed research noted that not only can student debt impede a borrower from saving sufficient resources for their retirement but that an increasing number of individuals are seeing their Social Security payments garnished to pay back federal student loan debt.
In Wisconsin, legislation first introduced in 2013 could help provide some relief. Under the terms of the Higher Ed, Lower Debt Act, the state would help borrowers to refinance their student loans, something they are currently unable to do, and lower their monthly payment amount or shorten the term of their obligation. Unfortunately for state borrowers Gov. Walker and the Republican controlled state legislature have blocked consideration of the proposal.
Republicans at the federal level, including Sen. Ron Johnson and Speaker Paul Ryan have also extended their obstructionism to block reforms like allowing federal student loans to be refinanced.
Ross concluded, “It’s far past time for Republicans to drop their obstructionism and do what’s needed to help older student loan borrowers increasingly burdened by their debt – allow them to refinance their student loans, just like you can with a mortgage, and lower their monthly payments.”