Washington, D.C., high school teacher Robert Geremia says that his still-hefty student loan bills are hurting not just his pocketbook but the U.S. economy.
If nothing is going to aid a rising generation of recent college graduates facing record college debts, “the economy will fail to fully recover as a generation of workers — like myself and my peers — will be too saddled with debt to invest in housing or business, or to make career choices based on anything other than earning potential,” Mr. Geremia told a Capitol Hill hearing this week.
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Mr. Geremia testified at a Senate Budget Committee hearing Wednesday examining the link between student debt and the economy. Sen. Sherrod Brown, Ohio Democrat, said some of the blame should go to lenders and loan-servicing firms that refuse to work with borrowers on more realistic repayment plans.
Mr. Brown warned that excessive student debt can “destroy the dreams of prospective first-time homebuyers, small business formation and entrepreneurship, and limit the options of young graduates who might work as teachers or doctors in rural areas.”
Sen. Elizabeth Warren, Massachusetts Democrats, co-sponsored a new bill last month that would allow students to refinance their loans at lower interest rates, but a new analysis from the nonpartisan Congressional Budget Office said the reform comes with a price: The CBO estimates that the bill could cost $51 billion over the next decade while helping to refinance about half of the $460 billion in outstanding federal student loan volume.
After obtaining his master’s degree of Social Studies Education from Teachers College, Columbia University, Mr. Geremia told the Senate panel he had to put his financial life on hold to focus on repaying the $37,000 in loans he took out to cover tuition as well as travel, accommodation, textbooks and general living expenses.
Some 60 percent of students who graduated with a bachelor’s degree in 2012 were dealing with more than $26,000 in debt, Lindsey Burke, an education policy analyst at the Heritage Foundation, told lawmakers. She also said that the number of students borrowing federal loans increased from 5.9 million to 10 million in the past 10 years.
But she said federal policies were in part to blame for soaring college costs, and that new taxpayer subsidies are not the answer.
“Continuing to simply increase federal subsidies for higher education will fail to solve the college cost problem,” she told the Senate hearing. “Moreover, such subsidies shift the responsibility of paying for college from the student, who directly benefits from attending college, to the taxpayer.”
But Ms. Warren and fellow Senate Democrats say legislative relief is needed, with approximately 7 million borrowers in default on their student loans.
Mr. Geremia said being able to refinance student loans would give him the chance to start a family. Right now, the interest rate on Mr. Geremia’s student loans is over 6 percent, meaning he will pay $11,000 in addition to the principal amount he borrowed, and there is no way to lower that interest rate under current law.
“I worry what will happen to my students, many of whom, as I testify today, are about to graduate and take on loans,” he said. “Why should the terms of the loans and the complications of the loan process dictate where they decide to go to school or what careers they will pursue?”