BY PEG LAUTENSCHLAGER
In 2013, 70 percent of college graduates in Wisconsin ventured into the world of work with college loan debt, ranking our state fourth in the nation for graduates with loan debt. Indeed, about one third of Wisconsinites who hold baccalaureate or advanced degrees—no matter how long ago they finished school—are still paying off college loans.
Nationally, college loan debt well exceeds $1 trillion. Wisconsin alone, has more than 800,000 student loan borrowers.
The impact of college loan debt on the entire Wisconsin economy is great; so much so that it impacts each and every one of us. A recent study by One Wisconsin Now showed that college loan debt costs our state more than $200 million per year in new car sales alone. Further, middle income families with college loan debt are overwhelmingly more likely to rent, rather than own, their residences.
The average Wisconsinite with a bachelor’s degree pays $350/month in college loans for nineteen years. The average for people holding advanced degrees is $448/month for 22 years. Most of these payments go to the nation’s big banks. Little stays in Wisconsin.
The college loan debt crisis has been created by the confluence of continued increases in the cost of education and changes in federal and state laws giving advantages to lenders and eliminating many rights of borrowers.
The cost of a college education has increased more than 600 percent since 1980—a number that far exceeds growth to income and wealth during the same period. This, alone, has caused more students to rely on loans.
When students obtain college loans they are afforded fewer legal protections than most borrowers. They have no refinancing rights, regardless of opportunities for lower interest rates. They are exempt from bankruptcy laws. Lenders may pursue collection of both principle and interest at any time. Usual truth in lending requirements, fair debt collection practice requirements, and most related state laws do not apply to student loans.
Borrowers with college debt are also urged to consolidate loans, often locking them into interest rates higher than those paid by other borrowers.
A number of state legislators and members of Congress have sponsored legislation aimed to place those with college loan debt on an even playing field with other borrowers. Wisconsin U.S. Senator Tammy Baldwin joined Senator Elizabeth Warren in forwarding legislation that would allow loans financing student debt to be refinanced when lower interest rates are available, just like home mortgages. Unfortunately, Wisconsin Senator Ron Johnson was among those blocking the legislation in the last session of Congress.
State Representative Cory Mason and State Senator Dave Hansen continue to put forward the “Higher Ed, Lower Debt Act” that would create a state authority to help borrowers refinance their student loans, just like you can a home mortgage. The bill would also allow for a deduction for student loan payments on state income taxes, just like you can with home mortgage interest. It would also require lenders give student loan borrowers the same detailed information before entering into loan agreements, offer counseling to students and parents on the implications of student loans, and require the state to collect and disseminate information about private lenders and maintain a ranking system.
The bottom line is that student loan debt in the United States is now greater than credit card debt. Further, it impacts Wisconsin disproportionately compared with other states in the union. The good news is that there are actions that can be taken by both Congress and our state legislature than can ease the economic burden that impacts all of us, especially those of us in Wisconsin. Let’s hope state and federal legislators seek serious solutions to this problem when they start anew this January.
Peg Lautenschlager is a former Wisconsin Attorney General and U.S. Attorney who currently practices law in Fond du Lac. She lives with her husband in Fond du lac.