The State of the Finances of Student Loan Borrowers: In Crisis
President Obama's State of the Union Can Boost Reforms to Restore Fairness for Millions of Hard Working Americans
MADISON, Wis. — The state of the finances of nearly 40 million Americans with an estimated $1.2 trillion in student loan debt is in crisis, according to One Wisconsin Now’s Executive Director Scot Ross. His organization’s original research in Wisconsin and nationally showed a significant, negative impact of student loan debt on borrowers who are repaying loans for terms nearing 20 years for an undergraduate degree and not making major purchases like homes and new cars.
Commenting on reports that President Barack Obama’s will speak to college access and affordability in his State of the Union speech Ross said, “The student loan debt crisis threatens to turn higher education into a debt sentence instead of a path to the middle class for current borrowers and future generations. That President Obama will feature this issue in his State of the Union address speaks to the urgent need for action to preserve the promise of a better future from education and job training.”
Americans are increasingly being squeezed by a system in which higher education budgets are being cut and tuition is skyrocketing, an average of 600% higher since 1980. At the same time, financial aid for eligible students has remained stagnant and big banks and even the federal government are profiteering on the interests on student loan debt. The federal government alone reports it will make more than $50 billion in profit from student loan interest in 2013.
A recent New York Times expose of rampant, abusive collection practices in the student loan industry and problems being found as consumer advocates increasingly scrutinize the operations of Sallie Mae, the largest student loan lender in the nation, are adding urgency to the need for reform according to Ross.
On a positive note, momentum is building to restore fairness to the student loan system. For example, Wisconsin Congressional Representative Mark Pocan has introduced legislation that would allow anyone with a federal student loan to refinance to the lowest interest rate available for that loan.
Ross concluded, “President Obama can give the fight for fairness and reform a huge boost tonight. Borrowers have done the right thing by working hard to get a higher education or job training and taking on the personal responsibility to pay for it. They are not asking for a bailout, just a chance at a fair shot at the middle class. They deserve the support, and the action, of our national leaders from both parties.”