With student loan debt hitting $1.2 trillion, the Senate plans to take up next week a bill introduced by Sen. Elizabeth Warren, D-Mass., the Bank on Students Emergency Loan Refinancing Act (S.2292), which would allow students to refinance their loans.
At a Wednesday hearing held by the Senate Budget Committee, titled “The Impact of Student Loan Debt on Borrowers and the Economy,” Sen. Patty Murray, D-Wash., chairwoman of the committee, said that today, the average college graduate faces paying back “around $30,000 in student loans,” and “a record number of young households owe student debt.”
That debt, she said, “can have lasting consequences for borrowers and weaken their chances of getting ahead,” including getting a mortgage and saving for retirement. Murray cited a recent study finding that college graduates without student debt had accumulated seven times more wealth than those who were paying back school loans.
But taking out student loans, Murray said, has become “a college prerequisite,” as the cost of college has skyrocketed.
Murray said that Sen. Warren’s student loan refinancing bill, which she co-sponsored, would allow borrowers to refinance their federal student debt.
The Congressional Research Service, she continued, ”estimates that this [refinancing] bill would let borrowers save $4,000 on average.”
Sen. Ron Johnson, R-Wis., noted the sizable increase in the cost of a college education over the years. He said that in 1963 a public college education, including room, board and tuition, was $929 per year; in 1988, that amount jumped to $4,678; in 2012, that figure stood at $17,474. Costs have risen at “two and a half times the rate of inflation,” he said. “Why?”
Murray also said there was “mounting evidence” that student debt is also holding back the economy.
“Historically, young Americans have been a source of economic activity, as they set up households and as they start their careers. But today, many are finding it difficult to save up for a down payment on a home. And the high monthly bills to pay back student loans can disqualify many people from getting a mortgage,” she said.
“When first-time homebuyers aren’t able to get mortgages, it can adversely affect the housing industry as a whole.”
Rohit Chopra, student loan ombudsman for the Consumer Financial Protection Bureau, told senators during the hearing that recent data has shown that “three-quarters of the overall shortfall in household formation can be attributed to reductions among younger adults ages 18 to 34, the age group disproportionately impacted by student debt.”