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Democrats Bank on Heavy Student Loan Debt as Election-year Issue

GOPs caution that lawmakers should look at "serious negative, unintended consequences of our good intentions."

by
Rodrigo Sermeño

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June 14, 2014 - 10:42 pm
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WASHINGTON – With student loan debt exceeding $1.2 trillion, Democrats are pushing a proposal that would allow students to refinance their loans as part of their election-year agenda.

Brittany Jones, a 2011 college graduate, testified before the Senate Budget Committee this month on her own experience with student loan debt. While pursuing a degree in education, Jones racked up more than $70,000 in debt after graduating from Virginia Commonwealth University.

“Student loan debt has been the driving force of my decisions for the last eight years of my life,” Jones said.

After graduation, she chose to enter the workforce, finding a teaching position that paid $10 per hour. Her monthly student loan payments were $600. Combined with her rent and living expenses, she was unable to stay current with her payments.

“According to my current repayment plan, it is projected to be for the next 25 years of my life, well into the years for which I should be planning a retirement,” Jones said. “It should not be that way.”

Senate Budget Committee Chairman Patty Murray (D-Wash.) said Jones’ story resonated with her, recalling that Pell grants and student loans helped her get through college.

That, however, has become “considerably more difficult than when I graduated,” Murray said.

Murray said 16 percent of young households had student debt in 1989, according to the Pew Research Center.  By 2010, that figure had more than doubled to 40 percent. A typical college graduate owes an average of $30,000.

Forty million Americans owe more than $1.2 trillion in student loan debt, making it the second leading source of debt in the nation.

“Crushing student debt isn’t just hurting borrowers,” she said. “There is mounting evidence that student debt is also holding back the economy.”

Rohit Chopra, the student loan ombudsman and assistant director with the Consumer Financial Protection Bureau, said excessive student loans threaten far-reaching sectors of the economy.

According to a survey by the National Association of Realtors, 49 percent of Americans cited student loan debt as an obstacle to home ownership. It has also been a main factor in explaining the relatively low levels of car purchases by young people, Chopra said.

He said higher debt burdens can hamper entrepreneurship and may also have a longer-term effect on future retirement security because it stops young workers from accumulating retirement assets.

Chopra also noted that refinancing opportunities at a lower interest rate are “few and far between” for student loan borrowers.

“When mortgage borrowers see broader interest rates plummet, their own incomes rise and their credit profiles improve, they try to refinance. Responsible student loan borrowers rarely have these options,” he said.

Sen. Elizabeth Warren (D-Mass.) has introduced legislation that would make student loan repayment easier by allowing them to refinance – both federal and private loans – at lower rates. Murray, who is a co-sponsor of the bill, said the Congressional Research Service estimates that the bill would let borrowers save $4,000 on average.

The bill would cost about $58 billion over 10 years, covered by a new tax on individuals earning high incomes.

Around 7 million student borrowers have defaulted on $100 billion worth of loans. Default rates on federal loans are more than triple those in the private market, according to the Wall Street Journal.

Richard Vedder, director of the Center for College Affordability and Productivity, said lowering borrowing costs would do nothing to address the main problem: rising tuition costs.

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Top Rated Comments   
I think the real issue is greedy colleges. I mean really, how do you justify charging $30,000 per year for school.

As usual, leftists like Patty Murray not only want to demagogue the issue, but take the absolute WORSE steps possible. Continuing to pump money into the student loan bubble will only make it worse when it finally pops.

Why are leftists so ignorant about such rudimentary concepts?
15 weeks ago
15 weeks ago Link To Comment
All Comments   (16)
All Comments   (16)
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Having this kind of post informs the public that somehow, student loan affects the economy. There was a study recently which states that, debt rate has dropped drastically for American young adults. The reason for these is that, young adults nowadays have too few resources to consider taking on new loans. Learn more at https://personalmoneynetwork.com
10 weeks ago
10 weeks ago Link To Comment
I find this post very informative. Colleges and universities should offer scholarship programs and financial assistance to all deserving students especially to those who excel academically but are financially incapacitated. If approved, President Obama's deficit reduction program could change the regulations for federal debt collectors. They could be allowed to call the cellular phones of borrowers with delinquent federally-backed loans. These debts include government student loans, most mortgages and back taxes. I have read it here: http://www.matchfinancial.com/what-is-a-payday-loan/.
13 weeks ago
13 weeks ago Link To Comment
If taxpayers continue to subsidize student loans, that should ONLY be for students legitimately qualified to go to college.

The article states that the average student loan debt is $30,000. Not peanuts, but a lot less than a house or condo. Megan McArdle shows the median is only $12,000, i.e, half of the students owe less than that, half more. And 72 percent owe $25,000 or less.

http://www.bloombergview.com/articles/2014-06-10/a-little-student-loan-debt-never-hurt-anyone
15 weeks ago
15 weeks ago Link To Comment
We massively subsidize real estate borrows and lenders, including artificially low interest rates. So what is the problem with allowing student loan borrowers to refinance to also take advantage of the same artificially low interest rates, especially those borrowers who are not in default on their loans. I get that loan forgiveness causes current students to take on more debt, allowing colleges to charge more for tuition. But seems like borrowers who have graduated and are not in default should be able to refinance without causing colleges to increase tuition further. Students entering college have no way to predict future interest rates. What am I missing?
15 weeks ago
15 weeks ago Link To Comment
SOP Buying votes with hot air and taxpayer money.

Tuition should be capped at a percentage of family income. It's only fair.
These large education corporations are gouging the consumer to enrich their officers and administrators by foisting a worthless product onto our children at outrageous prices. The government should do something beyond propping up the scam. It's only right.
15 weeks ago
15 weeks ago Link To Comment
How in the world is that fair? Why should you be able to purchase something for less money just because you don't make as much?
15 weeks ago
15 weeks ago Link To Comment
That's the progressive way. Suggest they live by their own rules and listen to the screams.
15 weeks ago
15 weeks ago Link To Comment
Do the few Democrat voters who are neither cultural saboteurs nor unreflective ever tire of marketing to the masses?
15 weeks ago
15 weeks ago Link To Comment
How many of these students worked a part-time job while at school? How many might have attended a commuter college or university close to home, or close to a relative, to save room and board? How many went to a community college for an AA degree before entering a 4-year institution.
There are ways of mitigating crushing debt, educational or otherwise. We're not all "entitled" to attend swank universities as a transition from youngster to adulthood. It's kind of hard to feel sorry for students who willingly sign loan agreements because the payment book is far, far into the future, barely visible through a fog of alcohol consumption, hook-ups, and minority/feminist/gay "studies" . . .
15 weeks ago
15 weeks ago Link To Comment
Colleges are ripping off students. Students may be complicit but they are not the villains. That's just an excuse for the rip off to continue.
15 weeks ago
15 weeks ago Link To Comment
Honestly? My husband worked a part-time job all while he was in college. He had trouble finding a meaningful job when he graduated and that was with a STEM. By the time, he was in a position to pay his payments, his debt had ballooned out of control. We now pay the equivalent of a mortgage just for his student loans.

I was lucky. I got an athletic scholarship, so we're pretty much out from under mine.
15 weeks ago
15 weeks ago Link To Comment
O.K., we now have "Common Core" (indoctrination) in all our K-12. Since late 1960's and early 1970's, we've seen the march of Fabian Socialism in all higher education across these fruited plains. A sharp turn to center-left politics in all of Washington DC has resulted with ever more government presence in everything America and American. "Global" is the new buzz word. Be it a "Crisis," "Social Justice," "Jurisprudence," "finance," "economics," even "education" it's labeled a "crisis" for whatever reason.
What is the single, common denominator of all this "crisis" mongering going on? Karl Marx. See, both German Nationalist Socialism and Soviet Union "Lenin inspired Communism" share this almost daily "crisis" mentality by one central government.
Why? one asks. Because autocratic rulers don't like a set system of declared rules and regulations abrogated by a people in either of those two nations (Germany and Russia). These "transforming" leaders of both Germany and former Soviet Union needed their own NEW SET OF RULES, REGULATIONS, policies and procedures to enslave their citizens. So, instead of We The People governing Our United States, we now have a cadre of "Fellow Travelers," Union Bosses, thugs and their henchmen working in concert to destabilize everything America and American. When, in American history has there ever been so many individual "crisis' besetting any area of our Constitutional Republic? HUH? Except for Union drives during the "Great Depression" and "Revolutionary 1960's" has America ever seen so many of its:1)religious, 2)educational, 3) governance, and 4) financial sectors so tattered, torn and decimated. Now, Our Executive branch is busy rewriting our US Constitution...BY FIAT ("I Have a Pen and a Phone"). And America's leaders in these four above mentioned areas of OUR USA. simply sit still and allow central government's takeover to unfold right before our very eyes...just like in Germany and former Soviet Union. Pray. Amen. God Bless America (that was). Join a local Tea Party. Register to vote and vote. Save Our precious heritage. This is not mismanagement! It is a total "transformation!"
15 weeks ago
15 weeks ago Link To Comment
I think the real issue is greedy colleges. I mean really, how do you justify charging $30,000 per year for school.

As usual, leftists like Patty Murray not only want to demagogue the issue, but take the absolute WORSE steps possible. Continuing to pump money into the student loan bubble will only make it worse when it finally pops.

Why are leftists so ignorant about such rudimentary concepts?
15 weeks ago
15 weeks ago Link To Comment
"I think the real issue is greedy colleges."

Of course it's the real issue. I like to say it's predatory tuitions.
15 weeks ago
15 weeks ago Link To Comment
Feature not bug.
15 weeks ago
15 weeks ago Link To Comment
Elizabeth Warren's plan does not require the borrower to make the lender "whole". If the government "forgives" the balance of the debt ("pubic service" workers after 10 years, the suckers after 20 yeras), then who will be stuck with the unpaid balance? If the universities were forced to co-sign and pay up the unpaid balance, then the taxpayers wouldn't get stuck with the bill.
15 weeks ago
15 weeks ago Link To Comment
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