It should raise alarm bells: Student loan debt is an ever-increasing concern that has a ripple effect, and it’s no longer a young person’s problem.
Jamie Dimon, chairman and CEO of JPMorgan, recently called it a “significant issue” in his annual letter to shareholders.
“The impact of student debt is now affecting mortgage credit and household formation — a $1,000 increase in student debt reduces subsequent homeownership rates by 1.8%,” he wrote. “Recent research shows that the burdens of student debt are now starting to affect the economy.”
The latest statistics show how serious the crisis has become for borrowers across all demographics and age groups. More than 44 million borrowers collectively owe $1.5 trillion in student loan debt in the U.S. alone.
Student loan debt is now the second highest consumer debt category — behind only mortgage debt — and higher than both credit cards and auto loans. Borrowers in the Class of 2017, on average, owe $28,650.
Wisconsin ranks sixth among states with 64 percent of 2017 graduates of four-year colleges carrying student loan debts. Of those Wisconsin students, the average loan holder carried nearly $30,000 in school-related debt.
What should Wisconsin do about it? That gets us to the well-defined differences of opinion in Madison and whether compromise could result in really tackling this problem.
Gov. Tony Evers’ 2019-21 budget proposal has advanced a Democratic plan calling for the creation of a student loan refinancing authority run by the state.
Democratic lawmakers have repeatedly introduced legislation calling for this. The authority would be charged with creating a system to buy federal and private loans and refinance them at lower rates, and borrowers would be able to deduct their loan payments from their income taxes.
As outlined in a recent column in the Kenosha News, the Evers’ plan calls for the Wisconsin Department of Financial Institutions, the Higher Education Aids Board and the State Treasurer’s Office to take a close look at how this program would benefit the state’s economy and the economic well-being of student loan holders throughout Wisconsin.
“By providing some help through refinancing and consumer education, we may be able to give our fellow Wisconsinites the tools they need to move forward and start building the improved futures that higher education was promising,” wrote Lara Sutherlin, administrator of the Division of Trade and Consumer Protection in the Wisconsin Department of Agriculture, Trade and Consumer Protection. “In the interest of the state as a whole, this is a goal worth pursuing.”
Some Republican lawmakers share the view that borrowers should be able to refinance their loans, but they say refinancing should be handled by private institutions rather than a state authority.
In 2017, the UW Credit Union announced that it would expand its membership eligibility to include any current or former college students who currently live in Wisconsin. The credit union had already offered refinancing and consolidation to its members for about three years.
Also, former Gov. Scott Walker froze UW System tuition for six years, a practice Evers has proposed continuing.
What happens now will depend on Democrats and Republicans working together on the issue in Madison. Let us remind them — as pointed out above — that Wisconsin ranks sixth among states with 64 percent of 2017 graduates of four-year colleges carrying student loan debts.