July 30, 2014

Student loan bill draws criticism

A Republican state lawmaker says legislation that would allow Wisconsin to help residents refinance their federal student loans may be creating “false hope.”

The bill from Democratic lawmakers would create a state refinancing authority for higher education loans, which could help residents lower their interest rates and reduce their payments. An estimated 750,000 Wisconsinites are currently making payments on student loans, and State Senator Dave Hansen (D-Green Bay) says helping them lower those rates “means millions, possibly billions of dollars that could be better spent buying new cars, new homes, and other goods and services in our communities.”

During a hearing on the bill Monday at the Capitol, Republican state Representative Michael Schraa (R-Oshkosh) argued that the chances of the state being able to lower interest rates on loans down to four percent is highly unlikely though. He says the state would have to sell bonds at below four percent to make that happen, which would be difficult to do because the bill says any bonds sold by the authority would not be backed by the state. Schraa says that makes them a risky investment, which usually requires higher interest rates to get anyone to purchase them.

AUDIO: Rep. Michael Schraa (:18)

The proposal would also require the state and schools to give students more up-front information about the debt they are taking on and creates a state income tax deduction for loans. Legislative committees in both the Senate and Assembly are considering the bill, although it remains uncertain whether it will receive a vote in either chamber before the session ends this spring.