Average UWM Student Debt Rose 194%
New study shows Wisconsin has more students in debt than 44 states. Any solution?
A new study by LendEDU on college student debt shows that Wisconsin still has more students in debt then most states in American and that the problem grew tremendously over the ten year period from 2007 to 2017.
The study shows that the average amount of debt of graduates in Wisconsin rose from $19,836 in 2007 to $29,451 in 2017, an increase of 48.5 percent — exceeding the increase in 30 other states.
But the picture was actually much worse than that because a higher proportion of students here — 64 percent — left with debt, a higher percentage than in all but six states. Wisconsin has gone from 16th highest in the percent of students with debt in 2007 to 7th highest in 2017.
Other public colleges in the state seeing huge increases in a student borrower’s average debt include UW-La Crosse, where it rose from $12,145 to $26,768, up more than 120 percent, and UW-River Falls, where average student debt rose from $12,500 to $27,428, up more than 119 percent. Both colleges ranked ahead of more than 850 colleges in the rate of increase in student debt.
Private colleges like M.S.O.E. (average student debt is $38,421) and Marquette ($37,713) have typically had much higher amounts of average debt, but this new study shows UWM has nearly caught up to Marquette and other public colleges are closing the gap. (Alverno College, which has been a leader in educating Milwaukee’s minority women, was not included in this study but an earlier one found a staggering 92 percent of graduates left with an average debt of $41,405.)
LendEDU, a website which offers consumer advice on loans, released its latest study on student loan debt today. One of its key recommendations for those with such debt is to find a way to refinance the loan: “a new lender will pay off your old loan(s) and issue you a new single loan with a lower interest rate or better repayment terms.”
This has been a key issue for Democrats over the eight year period when Republicans held control of both the state Legislature and governor’s office, under Scott Walker. Democrats introduced the Higher Ed/Lower Debt bill in 2013 and again in 2015 and 2017, which would have created a state authority to help graduates refinance their student loans, much like mortgage financing. But Walker and the Republicans each time opposed the bill.
State Sen Dave Hansen (D-Green Bay), a co author of the bill, blasts the GOP: “Scott Walker’s and the Republicans’ refusal to take up student loan refinancing is just another example of how little they care about anyone in our state who isn’t a millionaire, billionaire or corporation. What they fail to realize is that by ignoring this crisis they are not just hurting young people. They’re hurting car dealers, home sellers, restaurants, and all kinds of local businesses because the money being sent to Wall Street to pay interest on student loans isn’t being spent here on Main Street.”
Indeed, an earlier study by LendEDU found that the total amount of outstanding student loan debt in America had hit $1.52 trillion by 2018, making it the second highest form of debt in the U.S., second only to mortgages, and leaving borrowers delaying the purchase of a home (63 percent of borrowers) or even a car (47 percent) because of debt. In many ways, the debt is preventing graduates from becoming full fledged adults: Almost 30 percent move back in with their parents after graduation, 28 percent delayed getting married and 34 percent delayed starting a family because of the debt.
Walker’s response to this issue, some Democrats complained, amounted to telling borrowers to “call a bank.” But that’s not an option for most borrowers, because banks require things like a long work history, low debt-to-income ratios, and the ownership of a home or other significant assets.
Indeed Walker himself apparently faced this problem, as Analiese Eicher, Executive Director of the liberal group, One Wisconsin Now, points out. On his last financial filing as governor,“Walker himself reported over $100,000 in student loan debt obligations at interest rates in excess of 7 percent. Yet he does not appear to have taken his own advice and refinanced with a bank,” she notes. “Perhaps him having a temporary job and not owning a car or a home made him a bad credit risk and he was unable to fund a private lender to offer him a refinancing package?”
The legislation proposed by Hansen would create the Wisconsin Student Loan Refinancing Authority, which could issue bonds and provide loans under the program at the lowest possible interest rate that is still sufficient to cover the expenses of the program. The state program would not be run at the profit margin of a bank, or for that matter the federal government loan program (LendEDU notes the Department of Education’s estimated profit over the next 10 years is $127 billion), which would make it easier for borrowers to refinance at a lower interest rate.
Gov. Tony Evers campaigned in favor of such legislation during his campaign. His budget proposal includes setting aside $50,000 to study developing a state authority to refinance student loans, as Wisconsin Public Radio reported. “Evers recommends creating an advisory group that would consist of the state treasurer, executive secretary of the Higher Educational Aids Board and the secretary of the state Department of Financial Institutions. The group would provide a report to the Legislature on the operation of the refinancing authority, as well as projected costs and staffing needs.”
But that would require the state to move back some 40 years to the time when education was affordable for average people without big loans. The reasons college is vastly more expensive today are many: it’s a personnel-heavy industry which has gotten killed by the rising costs of medical care, administrative costs have risen drastically as chancellors and presidents get paid more like corporate CEOs, and state subsidies and federal Pell Grants haven’t kept up with rising costs. The idea that Kooyenga or anyone else can wave a magic wand and solve all these issues is naive and sounds like a delaying tactic.
In the meantime, the idea of a state authority to refinance loans could significantly lower monthly costs for borrowers. “Twelve states currently operate a student loan refinancing program,” the National Conference of State Legislatures reports. Three “created programs through legislation—Connecticut, Minnesota and North Dakota—while the other nine states started refinance programs without legislative approval…North Dakota residents can refinance student loans for a variable interest rate as low as 2.35 percent. “
The idea of helping students refinance their loans is very popular with voters as one poll found, with 85 percent of Democrats, 70 percent of Republicans and 82 percent of independents favoring the idea. The reality is that people of all political persuasions have family members with such debt. Few issues are likely to get such bipartisan support.
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