Amanda Chesser

Committee for Economic Development

Degrees, Not Debt

Reflection of Senate Budget Committee Hearing:
The Impact of Student Loan Debt on Borrowers and the Economy
Todays student loan debt has reached unsettling new heights- at a whopping $1.2 trillion,
student loan debts are now the second highest form of consumer debt, following mortgages. The
implications of this crushing statistic on the American economy and the future of young
borrowers is a growing concern for citizens and policy makers. On Wednesday, June 4, the
Senate Budget Committee held a hearing to shed light on the issue of student loan debt.
Experts like witness Rohit Chopra, of the Consumer Financial Protection Bureau, predict
student loan debt will have a domino effect that will topple across multiple fields of the
economy, including the housing industry, as young borrowers may not qualify for mortgages
because of their outstanding education debts. Chopra and the committee also expect student loan
debts to prevent graduates from making major purchases, such as automobiles, delay retirement
savings, and stifle entrepreneurship, as new businesses are unable to take the financial risks to
launch start-ups.
As Chairwoman Patty Murray points out, college grads on average earn more and have
lower unemployment rates than those without a college degree. Higher education levels also
equip the American workforce to be competitive in the 21st century global economy.

The cost of education

But why are students drowning in debt to begin with? As Sen. Ron Johnson and witness
Dr. Richard Vedder, a distinguished professor emeritus at the Ohio State University, point out,

the cost of going to college is increasing faster than it has in past generations- in fact; tuition
prices are rising faster annually than the overall inflation rate.
One of the three witnesses testifying before the Senate Budget Committee, Brittany
Jones, a 2011 Virginia Commonwealth University grad and an aspiring elementary school
teacher, is just one of the 40 million Americans whose future has been hampered by the cost of
her education. By the time she graduated, Jones accumulated more than $70,000 in student loan
debt, and exhausted her savings, and was forced to delay the pursuit of her masters degree.
Student loan debt has been the driving force of my decisions for the last eight years of
my life, Jones told the committee. And according to my current repayment plan, it is projected
to be for the next 25 years of my life, well into the years I should be planning a retirement.
As more students are faced with the ultimatum of debt or a college degree, policy makers
face pressure to take remedial action.

Searching for solutions

Several propositions have been suggested to help trim student loan debt, including a bill
introduced by Sen. Elizabeth Warren, that would allow student loan borrowers to refinance at
todays interest rates. However, as Dr. Vedder suggests, further action must be taken to ensure
access to higher education.
Senator Warrens refinancing bill, Bank on Students Emergency Loan Refinancing Act
is predicted to save borrowers an average of $4,000, and is expected on next weeks agenda.
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Additional Student Loan Debt Statistics:

2/3 of graduating students from American universities will graduate with debt.
The average borrower will graduate $26,600 in debt (The Institute for College Access

and Success (TICAS )Project on Student Debt)

Of the $1.2 trillion student loan debt, $1 trillion is in federal student loans
Student loan debts measure 6% of the overall $16.7 trillion national debt.
In 2013, the unemployment rate among recent college grads (aged 21 to 24) was higher

than the unemployment rate for the entire labor force; at 8.2 percent and 7.4 percent,
respectively