AFTER THE release of a report last week detailing that Ohio college graduates on average part with nearly $30,000 in student loan debt after receiving their diplomas, it prompted a response from Ohio Sen. Sherrod Brown.
He took the opportunity during his weekly press conference to begin outlining a plan that would help former students refinance private loans with more affordable options.
Highlighting his plan is the enticing aspect that it could all be done without costing the taxpayers one dollar. "Why should our students and graduates be the last to benefit from historically low interest rates? Helping graduates refinance their private student loan debt into more affordable terms frees up funds for them to buy houses, start businesses, or contribute to their communities. It makes sense for our students and graduates and it makes sense for our economy," Brown said.
"Too many Ohioans are still paying for college decades after they graduate - through private loans with high interest rates. My bill would allow borrowers to refinance their costly private loans into more affordable loans. These borrowers could see their interest rates cut in half, lowering their payments at no cost to taxpayers." he continued.
In 2012, the total outstanding student loan debt surpassed the $1 trillion dollar clip. Of those graduates with high student debt totals, %81 signed promissory notes on private loans which tend to carry much higher interest rates. After students exhaust federal loan limits, many turn to these private loans which can top %18 in some cases.
In a time with focus on economic recovery, it is important not to force out one of the most important demographics. It would be expected that those exiting higher education institutions would be those in a better position to start looking towards purchasing homes, cars, and other domestic products- all of which would continue to drive this ongoing recovery since 2008.
"The burden of the 'debt for diploma' system makes it harder for students to get ahead as they struggle to repay their loans. Student debt also negatively impacts the overall economy, as those with high levels of debt often must delay home purchases, pay higher mortgage rates and put off retirement savings; actions which ultimately lead, through a ripple effect, to a considerable wealth loss over a lifetime," says Robert Hiltonsmith, Demos Policy Analyst and author of a series of upcoming Demos reports quantifying the cumulative wealth effects of private and public student loans."Private student lending is particularly problematic because these high-interest, adjustable, market-determined loans are more likely to be borrowed by economically disadvantaged students and those attending for-profit institutions. And at an average interest rate of 10%, more than double the federal rate, many of these students need relief to avoid having these loans torpedo their financial futures."
Most of the points in Brown's outline creates more open, innovative, and competitive situation for private loan lenders to work in. With some proposed ideas, this sector could begin to benefit from the historically low interest rates. This also presents unique timing to better regulate reporting and oversight to help avoid such problems from arising again.
Brown also has been putting forth attention-raising efforts to help block interest rates from doubling for close to 400,000 Ohio students who rely on subsidized Stafford loans. If not action is taken by the July 1, 2013, interest rates ail jump nearly %7.0.
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