by Jenni Dye
This week marks the two-year anniversary of student loan debt topping $1 trillion nationally - and another year of missed opportunities to address this growing crisis.
That one trillion dollars represents the second-largest personal debt in the United States. But even that jaw-dropping reality doesn't tell the stories of millions of borrowers who are hamstrung by federal student loan policies and the lack of meaningful action to address this crisis.
My own story is one of the countless stories that fit into the $1 trillion of student debt. I attended the University of Wisconsin for undergrad and, thanks to scholarships, graduated with little debt. What debt I did have, I was able to consolidate it at roughly 4 percent. But when I attended UW for law school, my total debt quickly topped $100,000, with interest rates locked in at 6.8 and 8.8 percent due to changes in federal law. Consolidation couldn't reduce the interest rate, as federal law required my loan remain at the average of my existing interest rates.
I interviewed at several mid-sized law firms in Wisconsin. I ended up working in my hometown, and my salary, after my student loan payment and basic living expenses, left me with a handful of dollars left each month. Later that year, income based repayment (IBR) became available due to changes in federal law - and that helped my monthly budget by reducing my payment.
But, because IBR payments may not cover accruing interest, after paying roughly $20,000 towards my loans in the past five years, I now owe more than I did when I graduated. Under IBR, any amounts owed after 25 years of repayment may be forgiven - but under current law that forgiveness will be taxable, leaving borrowers to make a large balloon payment to the IRS. Meanwhile, the federal government is projected to earn $127 billion off of student loans in the next ten years.
Multiply my story by the hundreds of thousands of borrowers in Wisconsin alone - and by our families, many of whom have helped us along the way. And multiply it by our kids, who will enter college while we are still trying to pay off our own debt. Then you start to have a picture of the impact of $1 trillion of student debt.
Research by One Wisconsin Institute shows that borrowers are more likely to buy a used car instead of a new car and rent instead of owning a home, both of which are true for me. This has an impact on our entire economy as money that could be spent at local businesses is instead spent on student debt.
The lack of a solution to the student debt crisis is not for lack of trying. Wisconsin elected officials are attempting to lead the way out of this crisis. State Rep. Cory Mason and Senator Dave Hansen authored the Higher Ed, Lower Debt bill, an innovative approach that would provide tax breaks to borrowers in repayment and allow refinancing of student loans. Unfortunately, Republicans in both houses refused to bring the bill to the floor. Mary Burke has included provisions of the Higher Ed, Lower Debt bill in her jobs plan. Gov. Scott Walker, however, has been silent on addressing our state's growing student debt crisis.
In Washington, Rep. Mark Pocan has championed a bill that would allow refinancing of federal loans, allowing borrowers to obtain the lowest interest rate available, instead of a federally mandated one. Pocan estimates that nearly 40 million borrowers could benefit from this bill. Unfortunately, this bill remains stalled in the Republican-controlled House.
Student loan debt isn't a partisan issue despite the seemingly partisan divide on who is willing to address it. It is an issue that affects Republicans, Democrats, independents, my generation, older generations who have returned to school to seek additional training in a tough economy, and future generations who will continue to have the same problems we do - until we take action.
It is past time for all of our leaders to lead on addressing student loan debt. They have over one trillion reasons to do so.
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Jenni Dye is the Research Director of One Wisconsin Now & Institute, and like the nearly 1 million student loan borrowers in Wisconsin, isn't asking for a bail out, just a fair shot at the American Dream.