By State Senator Julie Lassa
On college campuses all over Wisconsin, students are heading back to class. These days, along with the traditional worries about graduating and getting a job, college students have the additional burden of wondering how they will shoulder a growing load of student debt.
Earlier this year, I had a chance to visit with students on the campus of the University of Wisconsin-Stevens Point who told me their stories of dealing with soaring tuition costs. Many are having to work longer hours and take fewer classes, or take time off school entirely so they can save for tuition. The extra workload delays graduation and makes college even more expensive. And nearly all the students I talked to are having to borrow more than they want to.
The U.S. Federal Reserve System estimates that there are 753,000 Wisconsin residents with federal student loan debt – and that doesn’t count the add-on loans that students and their parents borrow from the private lending market. Between 2004 and 2014, the average student debt for a Wisconsin graduate increased 74 percent, according to a report by The Institute for College Access & Success. Wisconsin college graduates in 2014 carried an average $28,810 in debt, compared to $16,560 a decade earlier. The typical Wisconsin student who graduates with a bachelor’s degree will make student loan payments of about $388 per month for almost 19 years. It’s becoming increasingly common for borrowers to have wages, tax refunds and even Social Security payments garnished to pay for student debt.
The student debt crisis doesn’t only affect college students and their families. College loan payments prevent graduates from buying the kinds of big-ticket items young adults typically purchase, such as cars and houses. That slows the growth in consumer spending, which in turn slows economic growth for all of us.
Students shouldn’t have to shoulder a crippling load of debt to get an education. That’s why I coauthored the Higher Ed Lower Debt Bill, a proposal that would help lower the burden of student loan debt on Wisconsinites.
Higher Ed Lower Debt would help in two main ways. First, it creates a Wisconsin Student Loan Refinancing Authority that will enable individuals to refinance their student debt, just as homeowners are able to do with their mortgages. With the interest rates on some student loans currently running as high as 12 percent, refinancing has the potential to create substantial saving for borrowers.
Second, Higher Ed Lower Debt will enable borrowers to deduct the interest they pay on student debt from their state taxes – again, just as homeowners can currently deduct mortgage interest. While the savings will vary based on the size and interest on individual loans, according to the nonpartisan Legislative Fiscal Bureau the typical borrower could see an income tax savings of approximately $179 under the Higher Ed Lower Debt Bill’s income tax deduction. Borrowers who are paying more per year in student loan payments could see tax savings up to $531 annually.
The bill contains other provisions that would help confront the student debt crisis. It would require higher education institutions to provide detailed information and loan counseling to students so that they understand the full financial implications of student loans and can make informed decisions. It would create a database and ranking system for private student lenders to help borrowers compare interest rates and consumer protections between institutions. And it tasks the Higher Education Aids Board to track information about student loan debt in Wisconsin to help policymakers better understand the depth and breadth of the debt crisis in the state.
Higher Ed Lower Debt is a commonsense proposal that will help students and their families better handle the cost of a college education. It will also be a boost to our entire economy by allowing consumers to spend less on student debt and more on the necessities of life, driving economic growth for all of us. The proposal deserves strong, bipartisan support.