Democrats on the Wisconsin Legislature's budget committee on Tuesday reintroduced an oft-rejected proposal that would allow student loans to be refinanced at lower interest rates. It was met with resistance once again by the committee's Republican majority.
The proposal, based on legislation introduced for the third time in February by Sen. Dave Hansen, D-Green Bay, and Rep. Cory Mason, R-Racine, would create a Wisconsin Student Loan Refinancing Authority, modeled after the Wisconsin Housing and Economic Development Authority.
The authority would be charged with creating a system to buy federal and private loans and refinance them at lower rates. Under the plan, borrowers would also be able to deduct student loan payments from their income taxes.
"We’re not trying to give away free money, but take some of the money that’s tied up (in debt) and let them refinance, let them put some more money in their pockets," said Sen. Jon Erpenbach, D-Middleton, of the proposal.
Wisconsin in 2016 had the fifth-highest percentage in the nation of graduates with student debt, at 70 percent, according to the Institute for College Access and Success. The average debt for someone with a bachelor's degree was about $29,000.
The ability to refinance student loans would encourage people with debt to stay in Wisconsin and to spend their money in the state economy, said Rep. Katrina Shankland, D-Stevens Point.
Democrats and Republicans agree the level of student loan debt is a problem, but they differ dramatically over how best to address it.
Gov. Scott Walker has panned the Democratic proposal, calling it "another government bureaucracy." The governor has said financial institutions like credit unions are better tasked with refinancing than a state authority would be.
Walker has touted an announcement made last fall that he says will give more student loan borrowers the opportunity to refinance their loans. UW Credit Union announced in September it would expand its membership eligibility to include any current or former college students who currently live in Wisconsin.
The credit union has offered refinancing and consolidation to its members for about three years, but previously, membership was available to past and current University of Wisconsin System students.
"The market intervention that needs to take place is us looking out for our citizens," said Rep. Gordon Hintz, D-Oshkosh.
Joint Finance Committee co-chair Sen. Alberta Darling, R-River Hills, agreed "refinancing is important," but said private institutions should be the ones to offer the option.
Republicans on the committee also pointed to their four-year tuition freeze for in-state undergraduate students at University of Wisconsin System schools. The committee's co-chairs said they plan to maintain that freeze in the 2017-19 budget.
"We put our money where our mouth is. We've frozen tuition," said Rep. Dale Kooyenga, R-Brookfield.
The best thing lawmakers can do to address the problem of student debt is to keep tuition low, Darling said.
"If you don’t borrow, you don’t have the debt. The best way not to borrow is keep the cost down," said Joint Finance co-chair Rep. John Nygren, R-Marinette. "That’s what we’ve done. That’s what we’re going to continue to do."
Rep. Mary Felzkowski, R-Irma, said young people considering attending college need to learn financial responsibility, and should consider the return on investment when taking out loans.
Darling also noted several budget provisions the committee has approved to increase funding for need-based financial aid.
Democrats argued those steps don't help people who have graduated and are paying off debt.
"These are people who are going to pay the money back, but cannot get a rate lower than what they’re dealing with right now," Erpenbach said.
The proposal was rejected on a 12-4 party-line vote.