Wisconsin could become the first state in the country to allow borrowers to refinance their student loans. Last week, the Wisconsin State Legislature held a second hearing on a bill that would create the Wisconsin Student Loan Refinancing Authority (WSLRA). Though Senator Elizabeth Warren’s (D-Mass.) effort to allow student loan refinancing nationally failed to pass the United States Senate twice, Wisconsin could lead the way creating a state authority regulating borrowers’ ability to refinance their debt for lower interest rates, like borrowers of other kinds of loans are already able to do.
According to Jeff Buhrandt, a spokesperson for the University of Wisconsin system, roughly half of all UW students–around 112,000 people–borrowed some form of student loan program in the 2013-2014 academic year. Additionally, about 74 percent of UW resident undergraduate students graduated that year with an average of $30,452 in debt.
Wisconsin Rep. Corey Mason (D-Racine), a cosponsor of the bill to create the WSLRA, noted that over 1 million Wisconsonites have student loans, and 60 percent are over the age of 30.The representative pointed to some common-sense math: For a recent graduate with $30,000 in debt and a $30,000 salary, monthly loan payments of $300-500 can be both a financial stress and a barrier to participating in the local economy.
“It is literally hindering people’s ability to thrive in the middle class,” asserted Rep. Mason. “And it’s hurting [our] economy overall to send so much of that money out of state, by and large, to big Wall Street banks, instead of putting it back into Main Street.” Rep. Mason also noted that research has shown that student debt borrowers are less likely or slower to cross large financial milestones that are important to the economy, like buying houses and cars and starting families.
The “Higher Ed, Lower Debt” bill also aims to improve the financial literacy of both students and their parents, though for many students taking on debt is inevitable, despite financial literacy and responsibility.
Colleen Gruscynski, a student from Green Bay, WI, told Wisconsin Public Radio that her family had no choice but to borrow: “My parents started saving for my college education, because they’re first-time graduates themselves, when I was about a month old.” Although Gruscynski was awarded a scholarship that paid about half of her in-state tuition, there was still a significant portion to cover.
“My parents, myself, we did our due diligence, but yet our student loan debt is more than our mortgage and our car payment combined,” said Grucynski.
The bill isn’t without criticism and potential roadblocks. Last session, a similar bill died in Wisconsin’s legislature. Some of the state’s Republican legislators have said such a bill isn’t quite realistic because the state would have to find the funding. Some of the bill’s proponents acknowledge it could help students, but perhaps not significantly enough, as federal student loans make up 89 percent of Wisconsin borrowers’ debt, while state loans comprise only a small portion of the remaining 11 percent of loans.
Still, if passed, Wisconsin could set a precedent for lawmakers to take real action in alleviating the vast $1.3 trillion student debt crisis, shared by 41 million Americans. The Wisconsin Student Loan Refinancing Authority would also place three UW students on the board, giving students an active voice in reeling in the spiraling cost of higher education.
The committee has not yet scheduled a vote on the bill, but progressive organizers in Wisconsin are glad to see progress at the state level. Jenni Dye, research director of One Wisconsin Now, who has around $100,000 of her own student debt, noted the urgency of the Wisconsin bill: “While the federal government isn’t acting to allow us to refinance our student loans, we really need the state government to step up and find ways to help us make it more affordable for us to be able to pay back our loans responsibly and also do all of the things that we think of as being part of the American dream — buying a house, starting a family, buying a car at some point.”