Student Borrowers in Wisconsin Want Student Loan Refinancing in Face of Opposition
Pictured above is the podium in the Wisconsin State Senate Room.
The other month, a new Public Policy Polling survey in Wisconsin found broad support for legislation that would enable student loan borrowers to refinance their loans at a lower rate. Of the 1,116 registered voters polled, 79 percent supported the idea, and 9 percent opposed it according to One Wisconsin Now.
The idea found strong support across party lines with positive responses from 70 percent of Republicans, 85 percent of Democrats, and 82 percent of independents. All gender and age groups supported the idea with numbers ranging from 71 percent to 87 percent.
The poll was commissioned by One Wisconsin Now, a 501(c)(4) non-profit, non-partisan issue advocacy organization with a progressive agenda.
Wisconsin is among the top states with high percentages of graduates with student debt with hundreds of thousands of borrowers owing more than $19 billion in federal student loan debt. Wisconsin has seen college tuition costs double over the last 12 years, and the average student borrower from the Class of 2016 owes $29,900. On a nationwide basis, about 40 million Americans owe more than $1.4 trillion in student loan debt.
Federal student loans can be consolidated but not refinanced through any government program. The interest you pay on a consolidated federal student loan is a weighted average of the interest rates on your existing federal loans. Banks and private student loan providers can refinance federal and private student debt, but they are profit-based. Additionally, it is typically hard to qualify for refinancing as a new graduate.
The wide support for student loan refinancing bolsters the argument for the Higher Ed, Lower Debt (HELD) bill. The bill is an effort by Democratic state legislators to offer relief to Wisconsin student loan borrowers. To date, the bill has engendered implacable opposition from the state’s governor, Scott Walker, and the Republican-controlled legislature.
The HELD bill would create a state agency to refinance student loans at a lower interest rates. The agency would be bond-financed, without any funding from taxes. In effect, the Wisconsin agency would compete with banks and private refinance companies like SoFi. The agency, being a non-profit, should be able to offer rates lower than those available from private student loan refinancers.
Other provisions of the HELD bill are:
- To allow Wisconsin residents to deduct their student loan payments from their state income tax. The average borrower would save $172 a year, and as much as $392. Wisconsin currently allows households to deduct college expenses of up to $6,543 annually.
- To provide parents and students with detailed information about student loans, including loan counseling and a ranking of private lenders from best to worst in terms of loan terms, interest rates and consumer protections.
- To collect and track data regarding student loan debt in Wisconsin to help inform lawmakers and the public about the student loan burden within the state.
Research indicates that the student debt burden depresses purchases of homes and cars, as well as hindering the ability of student borrowers to save for retirement and pay for their children’s education. Consumers with student debt are more likely to rent rather than buy their homes, and more likely to buy used cars instead of new ones.
Wisconsin consumers should benefit by the higher economic activity triggered by the interest savings available through state-sponsored student debt refinancing. Not only would the savings stimulate new car and home purchasing, but also sales of furniture, appliances, gardening equipment and supplies, and all the other spending related to home ownership. Sales and property tax collections should also rise.
As the proposed state agency would float bonds to pay for its operations, state income taxes would not increase from the HELD legislation.
As of now, any progress on the HELD bill will probably depend on the results of future elections. A Democratic sweep in Wisconsin’s state legislature and the election of a Democratic governor will certainly give the HELD bill a boost.
image copyright © Paul Frederickson