Attention On Student Loans Yields Efforts For Reform

Career College Central summary:

  • Repaying student loans can be a drag — and not just on your own finances. This month, the Senate Budget Committee held a hearing on the effect of student debt on U.S. economic growth. The hearing follows a growing body of research that suggests education debt, which tops $1 trillion nationally, is keeping today's 20-somethings from taking key financial steps — from buying homes or starting businesses to saving money for retirement.
  • "There's a student debt domino effect," said Rohit Chopra, student loan ombudsman for the Consumer Financial Protection Bureau who spoke at the hearing. He says loan repayment can soak up so much income that graduates have little money left to dedicate to other purposes.
  • In a survey last year by the National Association of Realtors, for example, 49 percent of people said education debt was a huge obstacle to homeownership. The survey was based on responses from 2,000 adults 18 and older. And a report released in May by the Pew Research Center, which analyzed the latest Survey of Consumer Finances by the Federal Reserve, found that households headed by college-educated young adults with zero student loan debt had a typical net worth of $64,700.
  • In contrast, young households with education debt typically had a net worth of only $8,700. In light of these trends, Senate Democrats last month introduced legislation that would allow students to refinance their student loans at a lower interest rate. The proposal, sponsored by Sen. Elizabeth Warren, D-Mass., aimed to help make repayment more affordable for graduates.
  • "Giving students the chance to refinance their student loans to today's (low) rates is a free market approach that would go a long way toward easing this burden" of debt, said Sen. Patty Murray, D-Wash., a co-sponsor of the bill and chairman of the Senate Budget Committee.

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