The Wisconsin Democrats have proposed a bill called The Higher Ed Lower Debt Act, which will allow students to refinance their student loans.
“It would create a state Student Loan Refinancing Authority allowing student loan borrowers to refinance those loans at much lower interest rates, just as homeowners do with mortgages,” said the bill’s developers, Rep. Cory Mason (D-Racine), Sen. Dave Hansen (D-Green Bay) and Sen. Chris Larson (D-Milwaukee).
“This bill is really appealing to me,” said University of Wisconsin- Stevens Point sophomore Sarah Bromley. “My question is how will the economy thrive if college graduates like us, with good paying jobs, can’t spend money because we are too busy paying off college loan debt? For my major I will have to go to school for six years and it is daunting to think of the $40,000 to $60,000 I will have in debt.”
Another idea behind the proposed bill is to keep the money used to pay off student debt in the state.
“Instead of sending dollars out of this state off to Wall Street to pay down loans because we’ve made it impossible for students to refinance, let’s refinance those loans right here in Wisconsin and put those dollars back into Wisconsin’s economy,” Mason said.
Carol Scipior, associate director of student financial aid, offered some insight of how graduates pay off their loans.
“The average debt for UWSP graduates in the 2011-2012 year was $ 27,100,” Scipior said. “However, students here have a good repaymenhistory. The latest Two-Year Cohort Default Rate provided by the Federal government shows that only 2.8 percent of UWSP borrowers default on their student loan payments. The State average is 6 percent and the national average is 9.1 percent.”
Scipior stressed that the key to getting out of student loan debt is to have a plan in which loan repayment is manageable.
“Loan repayment shouldn’t exceed 8 percent of adjusted gross income according to some experts, Scipior said. “I feel it should not exceed 5 percent of your adjusted gross income. An example of excessive payments is if you have $20,000 in loan debt and you make $35,000 a year, which after taxes and other costs is about $26,250. If you pay $230 a month to your loan that is about 10 percent of your adjusted gross income which is way too high.”
Scipior could not comment on the Higher Ed Lower Debt Act because she was not aware of all of the provisions. She indicated that perhaps there may be some benefits, but would need to see the entire bill before assessing the value.
Scipior went on to emphasize the importance of how students need to know what they owe and the repayment options available to them. If they have questions or would like information regarding repayment resources, the financial aid office is there to help with questions.
“If the money we are paying goes back to the schools it would show benefits, but if it goes elsewhere this bill wouldn’t be necessary. I say this because I don’t have problems with the current system,” said junior Lindsey Korst. “The big thing to me is where the money would be going. Would it benefit the students or would it be going to the upper-class?