Baldwin Pushes for Student Debt Reform at Senate Hearing

The United States has a student debt problem. It's a $1.2 trillion — and growing — problem, and its impact ripples far beyond the individuals paying back their loans.

The burden of that debt on individual graduates and the U.S. economy has been the focus of legislation from both state and national Democrats, including a bill spearheaded by Sens. Elizabeth Warren, D-Mass., and Tammy Baldwin, D-Wis.

Student loan debt's effect on the economy and the relationship between borrowers and lenders were the subjects of two U.S. Senate hearings on Wednesday. The Senate Budget Committee held a hearing on student debt and the economy, while at the same time, the Senate Banking, Housing and Urban Affairs Financial Institutions and Consumer Protection Subcommittee focused on borrowers' experiences with student loan servicing.

Three witnesses testified to the financial burden of student loan debt on both individual borrowers and the nation as a whole during the Budget Committee's hearing, chaired by Sen. Patty Murray, D-Wash. Baldwin and Sen. Ron Johnson, R-Wis., both serve on the committee.

The bill Baldwin, Warren and other Senate Democrats have introduced would allow borrowers to refinance their student loans at current interest rates, much like a homeowner can refinance their mortgages. It's expected to be debated in the Senate next week.

The Bank on Students Emergency Loan Refinancing Act is similar to legislation Rep. Mark Pocan, D-Wis., reintroduced in May, and to one sponsored in the state Legislature by Rep. Cory Mason, D-Racine, and Sen. Dave Hansen, D-Green Bay. The Higher Ed, Lower Debt bill has the backing of all 54 state Democrats; no Republicans have signed on.

"When you look at the impact of the significant increase in student debt load over the last decade, it tracks the story of America’s middle class not being able to get ahead anymore," Baldwin told The Capital Times after the hearing. "That’s something we can do something about. The relief that this would bring, both graduate by graduate, and also across the economy, is very significant, and I think we should tackle this issue expeditiously."

Baldwin spoke in favor of student loan reforms — particularly the refinancing bill — during the Budget Committee hearing, focusing heavily on the impact of student debt in Wisconsin.

According to the U.S. Federal Reserve System, some 753,000 Wisconsinites and 40 million graduates nationwide carry federal student loan debt, not including those who obtained private loans to pay for college.

On average, state residents with student loans (whether federal or not, and for both undergraduate and graduate degrees) owed $22,400 in late 2012, according to the U.S. Federal Reserve System.

The loan refinancing bill would allow those with loans taken out before 2013 to refinance at roughly 3.86 percent, the interest rate approved for post-2013 loans by Congress last summer.

Research from One Wisconsin Institute has shown that those with student debt are more likely to rent than own homes and more likely to buy a used car than a new one.

Rohit Chopra, student loan ombudsman and an assistant director with the federal Consumer Financial Protection Bureau, testified during the hearing that the country's $1.2 trillion debt is hampering not just the short- and long-term financial security of borrowers, but the greater economy.

"Ignoring the warning signs may prove to hold back not only the future growth and dynamism of our economy, but also our spirits," Chopra testified. "Addressing these concerns in the near-term may pay dividends for many years to follow."

Johnson questioned Chopra on the effectiveness of "shifting the debt from a select few to all of our kids and grandkids" and criticized loan forgiveness programs for offering solutions "on the backs of the American taxpayer."

Warren's bill is designed for borrowers with high loan balances relative to their income. To prevent the bill from adding to the federal deficit, it would enact the "Buffett Rule," imposing a minimum tax rate on millionaires.

Johnson's remarks drew strong criticism from Scot Ross, executive director of the liberal advocacy group One Wisconsin Now.

"Sen. Johnson has said a lot of nonsensical things about student loan debt. But today’s tour-de-force of ignorance on the depths of the student loan debt crisis and opposition to a common sense, market based solution like allowing loan refinancing takes the cake," Ross said in a statement.

Baldwin pointed out that the bill would not contribute to the federal deficit. Warren has also indicated willingness to find another way to offset the cost, if the Buffett Rule component meets GOP opposition.

Baldwin also said loan forgiveness programs are "completely different from what we're talking about, which would respond to the needs of the tens of millions of students that aren’t eligible for these type of loan forgiveness programs and are currently ineligible for refinancing — paying, in many cases, much higher interest rates, 7, 8 percent. It’s an incredible burden and there’s nothing they can do about it unless we pass this bill."

She and several other female Senators also spoke Wednesday about the disproportionate impact of student loan debt on women.

A study by the American Association of University Women found that one year after graduation, nearly half of women working full-time, compared to 39 percent of men, were spending more than 8 percent of their income on student loan payments. According to the same study, in 2009, women with college degrees made 82 percent of men's salaries one year after graduating.

"We’re not suggesting there’s a secret higher interest rate than there is for men … or that colleges or universities charge higher tuition," Baldwin said. "What it is is the intersection of the fact that we live in a country where there's not yet equal pay for equal work or comparable pay for comparable work — the intersection of that with a lack of college affordability."

In Wisconsin, Democratic gubernatorial candidate Mary Burke has made student loan debt a key part of her jobs plan. Her proposals include creating a state authority to help borrowers refinance their loans, increasing the amount of a state tax deduction for tuition and allowing borrowers to deduct student loan payments from their state taxes.