Student loan debt in this county has been increasing at an astronomical rate. Not only is total student debt increasing, but more and more college graduates find themselves defaulting on their student loans. To combat this problem, Wisconsin legislators Sen. Dave Hansen, D-Green Bay; and Rep. Cory Mason, D-Racine, have introduced a bill that would give students some relief from their student loan debt. Although this measure would have a larger and more positive effect on the Wisconsin economy than Gov. Scott Walker’s $100 million property tax cut, the bill still doesn’t go far enough in terms of fixing our nation’s student loan debt problem. Nevertheless, this bill is a small step in the right direction.
Student loan debt in this country is currently at more than $1 trillion. According to the Federal Reserve of St. Louis, this has almost doubled since 2007. This high amount of student loan debt has led to more and more students falling behind on their loan payments, if not defaulting entirely. For instance, according to the Federal Reserve of St. Louis, “In the fourth quarter of 2012, 11.7 percent of student loan balances were delinquent for 90 days or more, up from 11 percent in the third quarter.” Not only are more college graduates defaulting on their student loans, the Federal Reserve of New York “found that nearly half of all student loan borrowers are either in deferral or a forbearance period.”
At this point, it is obvious there is a student debt problem in this county. Now the question is: what caused it? One reason is tuition has, on average, increased at universities. College tuition has been rising because many states have not been adequately funding their state universities — without enough funding, universities have to raise tuition. Of course, when tuition prices increase, this means college students must then take out larger student loans. To pay off these larger and larger loans, students need well-paying jobs. Here we find the problem: a job market that is still relatively stagnant — especially for recent college graduates.
If tuition keeps rising higher and higher, which then results in students taking out more and more student loans, and if college graduates increasingly find themselves with either low-paying jobs or no jobs at all, how can we realistically expect them to pay off their student loan debt? The answer is, we can’t.
Now, the proposal introduced by Sen. Hansen and Rep. Mason would help relieve college students and graduates in Wisconsin of some of the burdens caused by rising tuition and debt. According to Wisconsin Public Radio News, their proposal “would allow student debtors to deduct up to $6,500 of their student loan payments annually from their state income tax and the opportunity to refinance their loans.” The Legislative Reference Bureau has estimated that an average Wisconsin resident under the proposal would have an income tax savings of approximately $172 — not an unsubstantial amount for someone trying to make ends meet. Although it is true this proposal is a step in the right direction, it is equally true though much more can and must be done to fix our student debt problem.
Eventually, I believe the federal government will have to face the national problem of financing higher education (including unsustainable student loan debt) and solve it — it is not a problem to be fixed on a state-by-state case. One possible solution would be for the federal government to create a scheme where college graduates pay a graduate tax. With a graduate tax, students pay no tuition. Instead, a student pays back a modest percentage of annual earnings (usually 1-3 percent) to the government for a period of about 20 years. A graduate tax has already been enacted in Oregon and has been advocated for by some British politicians.
I think the real solution to the problem of financing higher education can be found in one country: Denmark. Yes, I said Denmark. In Denmark, university students go to school tuition-free. Furthermore, students get government assistance on a monthly basis for school and living expenses. As one student said, “We get paid to go to school actually. Instead of in the U.S. you pay to go to school, we get paid to go to school if we pass our exams.” It is unfathomable how in the richest industrialized democracy in the world, we still have not found a way to make higher education tuition-free.
The student loan debt problem is certain to get worse, at least for the time being. Hansen and Mason’s proposal is a step in the right direction and would help Wisconsin students obtain some relief from skyrocketing debt. In the end though, this is a national problem. If we truly want to fix this problem, it will take action from the federal government.
Aaron Loudenslager ([email protected]) is a second year law student.
