Washington, D.C— Today, Chairman Patty Murray (D-WA) and the Senate Budget Committee held a hearing on the Impact of Student Loan Debt on Borrowers and the Economy with majority witnesses Rohit Chopra, Student Loan Ombudsman at the Consumer Financial Protection Bureau, and Brittany Jones, recent college graduate and Former President of the Student Virginia Education Association. At the hearing, Murray addressed how student loan debt has lasting repercussions for young adults as they start their careers, and holds back the economy by limiting borrowers’ economic activity. Murray called on Congress to ease the burden of student loan debt by passing legislation allowing borrowers to refinance their federal student loan debt to today’s rates.
Key Excerpts from Chairman Murray’s Opening Statement:
“A college degree is a worthwhile investment, and for many, it can be a ticket to the middle class. We know that on average, college graduates earn more, and they tend to have lower unemployment rates than their less-educated peers. A highly educated workforce is also good for our country. It strengthens our middle class. And it strengthens the workforce we’ll need to compete in the 21st century global economy. .. But to afford college, many people have to turn to student loans to help finance their education.”
“More young people than ever before are dealing with more student debt than ever before. And that can have lasting consequences. Americans who took out school loans can find it difficult to save and accumulate wealth. A recent study found that college graduates without student debt had accumulated seven times more wealth than those who are paying back school loans.”
“Crushing student debt isn’t just hurting borrowers. There is 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.”
“Student debt can also stifle entrepreneurship. Young people, who dream of starting up their own businesses aren’t able to take the risks and the business loans that are usually needed when launching a start-up. Paying off student loans can also prevent young people from saving for retirement, or making the kinds of purchases that help further the economic recovery.”
“The Bank on Student Emergency Loan Refinancing Act is a bill from Senator Elizabeth Warren that I’ve cosponsored, along with several of my Democratic colleagues… Passing that legislation would put more money in borrowers’ pockets, so they can make ends meet, so they can make a down payment on a house, so they can start new businesses and grow the economy. Right now, people can refinance their home loans or their business loans when interest rates drop. This bill would let borrowers with federal student debt do the same. And, this should be a bipartisan issue.”
“At a time when higher education is more important than ever to our nation’s long-term competitiveness, a college degree shouldn’t drown borrowers in debt. Now, and in the future, we need to make sure that people who choose to further their education and build their skills are better able to afford college and manage their student debt. It is an economic imperative. To strengthen our middle class, to strengthen our workforce, and to help spark economic growth, Congress needs to address these challenges.”
Full Text of Chairman Murray’s Opening Statement:
“This hearing will now come to order.
“Thank you to the Ranking Member, Senator Sessions, and all of our colleagues for joining us.
“Today, we’ll be discussing a challenge that 40 million people around the country face.
“For many Americans, who want to further their education and build their skills, taking out student loans has become a college pre-requisite.
“But that debt can have lasting consequences for borrowers and weaken their chances of getting ahead.
“Ensuring more Americans get a fair shot is something many of us here in the Senate are very focused on. And a bill that is coming to the floor soon, which would allow borrowers to refinance their school loans, is an important part of that Fair Shot Agenda.
“I’ll discuss that refinancing legislation a bit more later.
“But first, I want to thank our witnesses for being here to shed light on the challenges that mounting student debt can pose for borrowers and for our economy.
“Today, we’ll hear from Rohit Chopra. He is the student loan ombudsman for the Consumer Financial Protection Bureau.
“I’m also pleased to welcome Brittany Jones, who is a recent graduate and the former president of the Student Virginia Education Association.
“We’ll also hear from Richard Vedder, Distinguished Professor Emeritus of Economics at Ohio University.
“A college degree is a worthwhile investment, and for many, it can be a ticket to the middle class.
“We know that on average, college graduates earn more, and they tend to have lower unemployment rates than their less-educated peers.
“A highly educated workforce is also good for our country. It strengthens our middle class. And it strengthens the workforce we’ll need to compete in the 21st century global economy.
“More and more, jobs of the future will require post-secondary credentials or degrees. In fact, in the coming years, as many as two-thirds of all jobs will require at least some college education, according to the Center on Education and Workforce.
“But to afford college, many people have to turn to student loans to help finance their education.
“In just a few moments, Brittany Jones will discuss how taking out student loans made it possible for her to get a college degree.
“Brittany, I look forward to hearing more about your experience, as you’ve worked to start a teaching career, while paying down your student loans.
“Of course, Brittany isn’t alone. Dealing with overbearing student debt has become a reality for a growing number of Americans.
“The statistics are staggering. Today, the average college graduate will have to pay back around $30,000 in student loans. And a record number of young households owe student debt.
“Back in 1989, 16 percent of young households had student debt. By 2010, that figure had more than doubled, according to the Pew Research Center. More young people than ever before are dealing with more student debt than ever before. And that can have lasting consequences.
“Americans who took out school loans can find it difficult to save and accumulate wealth.
“A recent study found that college graduates without student debt had accumulated seven times more wealth than those who are paying back school loans.
“Crushing student debt isn’t just hurting borrowers. There is 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.
“When first-time homebuyers aren’t able to get mortgages, it can adversely affect the housing industry as a whole. That’s why groups like the National Association of Realtors and the Homebuilders Association have expressed concern about the overbearing financial weight of student loans.
“Student debt can also stifle entrepreneurship. Young people, who dream of starting up their own businesses aren’t able to take the risks and the business loans that are usually needed when launching a start-up.
“Paying off student loans can also prevent young people from saving for retirement, or making the kinds of purchases that help further the economic recovery.
“Mr. Chopra, I know these economic consequences are what you, and others at the Consumer Financial Protection Bureau, have called the ‘domino effect.’ I’m looking forward to hearing more details in your testimony about those negative economic effects.
“To address these challenges – as a starting point – we need to ensure that student loan servicers – the companies who handle billing and track borrowers’ payments – are treating those borrowers fairly and responsibly.
“Unfortunately, there have been alarming reports of student loan servicers mistreating borrowers. Some people have discovered their student loan servicer hasn’t properly processed payments.
“There have also been complaints that private student lenders have put borrowers into default if a co-signer dies, despite the borrower being current on their loan payments.
“And I was very troubled to hear recent reports that Sallie Mae was overcharging military members on their student loans. Sallie Mae has recently agreed to pay nearly $100 million in fines after charging military members higher interest rates. And I’ve asked Secretary Arne Duncan to investigate to make sure other student loan servicing companies aren’t doing the same.
“But we can do more to help borrowers. The Bank on Student Emergency Loan Refinancing Act is a bill from Senator Elizabeth Warren that I’ve cosponsored, along with several of my Democratic colleagues.
“That bill would allow borrowers to refinance their federal student debt. The Congressional Research Service estimates that this bill would let borrowers save $4,000 on average.
“Passing that legislation would put more money in borrowers’ pockets, so they can make ends meet, so they can make a down payment on a house, so they can start new businesses and grow the economy.
“Right now, people can refinance their home loans or their business loans when interest rates drop. This bill would let borrowers with federal student debt do the same. And, this should be a bipartisan issue.
“Just last year, for example, Republicans and Democrats came together to pass the Bipartisan Student Loan Certainty Act. That bill allows new borrowers to take advantage of lower interest rates, established by the free market. This refinancing legislation would use those same free-market principles to help those with existing student loans.
“At a time when higher education is more important than ever to our nation’s long-term competitiveness, a college degree shouldn’t drown borrowers in debt.
“Now, and in the future, we need to make sure that people who choose to further their education and build their skills are better able to afford college and manage their student debt. It is an economic imperative.
“To strengthen our middle class, to strengthen our workforce, and to help spark economic growth, Congress needs to address these challenges.
“Before hearing from our panel of witnesses, I will turn to Senator Sessions for his opening statement.”
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