Tammy Baldwin, Mark Pocan focus on student loan debt relief

U.S. Sen. Tammy Baldwin, D-Wis., was on the UW-Madison campus Friday to talk about student loan debt reform, an effort that is gaining attention and potentially traction with a boost from local Democrats.

"A college education should be a path to prosperity not a path to indebtedness,” said Baldwin in a statement. “Student loan debt is holding back an entire generation and creating a drag on economic growth for our country. The ability to refinance at lower rates provides some relief to borrowers and gives them a fair shot at building a stronger future for themselves.”

Baldwin joins U.S. Sen. Elizabeth Warren, D-Mass., as an official sponsor of the Bank on Students Emergency Loan Refinancing Act.

The bill is similar to one reintroduced Fiday by U.S. Rep. Mark Pocan, D-Madison, and the first state-level bill sponsored by state Rep. Cory Mason, D-Racine, and Sen. Dave Hansen, D-Green Bay. The Mason-Hansen bill, Higher Ed, Lower Debt, has the support of all 54 Democrats in the Wisconsin Legislature. No Republicans have signed on in support.

While these bills are moving through different levels of government, they would allow those with student loans to refinance at a lower rate.

Unlike car, home or personal loans, student loans can be consolidated but cannot be refinanced under current law.

The Baldwin-Warren bill would allow those with outstanding student loan debt to refinance at roughly 3.86 percent, a lower interest rate than what is now being offered to those who take out federal student loans. The 3.86 percent interest rate was approved by Congress last summer.

That’s also a significant drop from the 6.8 percent rate offered to those who took out subsidized or unsubsidized Stafford loans in 2010 or 2011, for example, with interest rates varying greatly depending on the type of loan. Those with loans at this higher rate could refinance if the federal bill is passed into law.

“A college affordability package is expected to reach the Senate floor in early June,” said Leah Hunter, a Baldwin spokeswoman. “The bill has not been finalized at this time but will contain a refinancing component.”

Democrats in favor of reforming the student loan system say debt hamstrings the purchasing power of college graduates.

“Two-thirds of Americans now leave college drowning in debt, unable to achieve their dreams or contribute to the economy in a meaningful way,” said Pocan in a statement. “Instead of relying on college graduates to bankroll Washington’s needs, the federal government should be doing all that it can to make a college education as affordable and accessible as possible.”

At the proposed rate, the federal government is expected to accrue $127 billion in interest from student loans over the next decade, according to the Congressional Budget Office.

In Wisconsin, the average student graduates from college owing $22,460 in student loans. Nearly 800,000 individuals in Wisconsin and 40 million American nationwide have outstanding student loans, according to Pocan’s office.

By allowing the average borrower to refinance their loans at 4 percent, they would be saving $8,483 over the 20 year life of the loan, according to Pocan’s office.

Pocan, Mason and Hansen will participate in a town hall-style discussion hosted by the liberal advocacy group One Wisconsin Now from 5:15 to 7 p.m., May 15, at the Pyle Center on the UW-Madison campus.

“After borrowers have been suffering with debt for years they now have champions arguing that they should be treated fairly,” said Scot Ross, executive director of One Wisconsin Now. “Wall Street and, unfortunately so far, the Republicans are showing an unwillingness to also stand up for student loan debtors.”