Student loans made it possible for Brittany Jones to attend Virginia Commonwealth University and pursue her dream of becoming a teacher – yet her $60,000 loan became an immediate pressure as soon as she graduated.
“My student loan payment plan required $653 a month, yet I was making only $10 an hour with the burden of almost $800 for rent and utilities.”
The horrors of the current student loan debt policies didn’t stop there: When Jones lost her job within the next year, the services company almost immediately informed her that she had defaulted on $58,000 of her loans. The newly devised payment plan figures still was beyond her ability to pay.
Jones was one of three witnesses at the Senate Budget Committee’s hearing this Wednesday on “The Impact of Student Loan Debt on Borrowers and the Economy.”
Testifying with Jones was economist Rohit Chopra of the Consumer Financial Protection Bureau and Ohio University professor Richard Vedder, who explained the damage the current levels of student debt is doing to individuals once they leave college and to the economy as a whole.
Sen. Patty Murray (D-Wash.), chairman of the committee, said that Jones is one of the 48 million Americans today who are suffocating under the pressures of student loans with interest rates as high as 9 percent. For college students today, these loan balances average $30,000, according to Murray. These debts total almost $1.2 trillion, and are rising at an increasing pace. While federal student loan programs may help aspiring youths like Jones gain degrees that lead to meaningful careers, the debt is not only an individual burden for the graduates; their cumulative impact threatens to overwhelm the entire American economy.
Compounding the student loan problem are problems of fairness, responsibility and transparency with student loan servicers, according to witnesses at this hearing and another hearing on Wednesday that focused on the servicing industry. Reports of mistreatment – including the Sallie Mae scandal in which military members were improperly higher interest rates – reveal the fundamental misalignment of interests between loan servicing companies and student borrowers that lawmakers and government regulators must more effectively address.
Chopra said the more than $1.2 trillion student loan debt is also keeping potential consumers from getting their first car, qualifying for mortgages, and buying other goods and services. Student debt also harms entrepreneurship; college graduates with high student debt are more wary about their income and savings and less likely to risk investing in their own talent and ideas. Reducing student loan debt is also an economic imperative that will spur further economic growth.
Vedder offered this important insight: The trillion-dollar debt would have never happened if college costs increased at just the rate of inflation instead of 50 percent higher – an average rate of almost 3 percent at a time the general inflation rate is 2 percent annually. Yet, ironically, these rising tuition figures are partially caused by the large federal student aid programs–thus we must radically and responsibly change the nature of federal finances to both reduce current debt figures and prevent future tuition costs from continually soaring.
We can no longer let the present high student loan debt phenomena continue–refinancing loan interest rates must be a top priority addressed now. In her opening remarks, Murray called attention to Sen. Elizabeth Warren’s “Bank on Students Emergency Loans Refinancing Act,” which would move our nation towards solving the burdens of student loan debt. The bill would allow borrowers to refinance their debt, saving on average $4,000 for every individual, helping them make ends meet while growing the U.S. economy.
We allow businesses or mortgages to refinance loans to take advantage of lower interest rates. It is time to allow student borrowers to do the same.
Sign this petition today to join Senator Warren and Campaign for America’s Future in urging the passage of the Bank on Students Emergency Loans Refinancing Act.