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Kendrick: The Case for Missouri Student Loan Refinancing

   

By Rep. Kip Kendrick, D-Columbia

From 2000-2014, outstanding student loan debt nearly quadrupled to $1.3 trillion. Today, the average student borrower owes over $26,000, a sharp rise since 2000, and a direct reflection of states like Missouri that fall short in their obligation to adequately fund higher education.

Also rising is the number of student loan defaults, having doubled since 2000 to more than 13%. The rising debt levels and defaults demand our attention. As policymakers, we cannot allow or afford student debt to become our next debt crisis or stifle the disposable income of a generation.

Kendrick
Kendrick

The current repayment structure puts an unnecessary burden on many Missouri residents. High loan interest rates, the standard 10-year repayment period, and cumbersome bureaucratic red tape means many Missourians struggle to make their monthly payment. Borrowers may spend a higher percentage of their monthly income to pay back student loans, which means less money available for buying a first home or investing in a business. Or at the verge of default, borrowers may face ballooning balances beyond the original borrowed amount.

The standard 10-year repayment period on student loans, dating back to 1958, was adequate when student loans were smaller and monthly payments were lower. That is no longer the case. A 10-year repayment plan requires that students pay the bulk of the debt when earnings are lowest and job security is least stable. As student debt has increased, a longer repayment period coupled with lower interest rates will reduce the repayment burden and improve economic opportunities for thousands of Missourians.

I will soon file a bill in the Missouri House of Representatives to provide a refinancing option for Missouri graduates to consolidate student loans, reduce interest rates, extend the repayment period, and cap monthly payments to 15% of discretionary income. In listening sessions held across the district, I heard numerous first-hand accounts of the real concerns of growing student debt and how it affects current and future decisions of middle class families. Far from a partisan issue, growing student debt may be the defining issue of this generation.

During this legislative session, the Missouri General Assembly will have the opportunity to pass a student loan refinancing program at the state level, saving Missourians thousands of dollars over the life of their loans, and emerging as a national leader in student loan reform.

Missouri bears a responsibility to decrease student debt burden and improve repayment options as a result of the intentional cost shift to students for their education. Missouri is currently 44th in the nation in higher education spending. Today, the University of Missouri (MU) has 18,000 more students, yet receives less state funding than in 2002. Public higher education institutions across the state have cut budgets, deferred maintenance costs, improved efficiencies, and increased work loads, yet operating expenses have increased because enrollments have risen. The result has forced universities to seek other revenue streams, meaning increased tuition and fees for students. This cost shift from state budgets to individual students and families is at the core of increased student borrowing.

To be clear, college is still worth the cost. Today’s college graduate earns 77% more than a high school graduate. Higher education is the fastest route out of poverty. Education is the best investment in sustaining and growing a vibrant middle class. Our state budget must act on the rhetoric of politicians who talk about building a stronger middle class. It’s time to invest more in higher education. Until that time, the least we can do is offer graduates relief through a student loan refinancing option at the state level. Tomorrow’s leaders cannot be stifled by massive student debt. This hurts all Missourians.