Blumenthal discusses college loans

WINSTED — U.S. Sen. Richard Blumenthal (D) visited Northwestern Connecticut Community College (NCCC) for a forum on student loans on Thursday, Oct. 23.

More than 100 members of the college community attended the forum, which was held in the Draper Conference Center on campus.

“Senator Blumenthal is an incredible advocate for higher education,” College President Barbara Douglass said in her introduction at the forum. “Whether it is student loan interest rates, student loan forgiveness or most recently, sexual assault awareness.”

In April, Blumenthal led a forum about sexual assault at NCCC.

“The amount of student debt is absolutely astonishing,” Blumenthal said at the beginning of the forum. “It’s the largest consumer debt in total in America, except for mortgage debt. Student debt is not based on a tangible asset. It’s based on an education.”

Blumenthal said that student loan borrowers could end up paying back their loan over the course of their whole lifetimes.

“The average consumer debt in the state is more than $30,000, probably in the range of $40,000 to $60,000 for most people,” he said. “That means a lot of people in this state can’t start new businesses, buy new homes or begin new families. Young people are financially crushed by student debt. A lot of Americans don’t understand the crushing and financially crippling impact of student debt.”

Blumenthal said that some people are paying student debt with interest rates of 11 to 12 percent.

“The average rate is 3.86 percent, but in my view even that rate is too high,” he said.

He said last year he introduced a bill with Sen. Elizabeth Warren (D-Mass.) that would have reduced all student loan interest rates to 3.86 percent.

“That is a very modest measure,” Blumenthal said. “It is the most searing indictment of our present system that the federal government makes money on student debt, billions of dollars every year.”

Blumenthal said another proposal he has made is to reduce the interest rates to 1 percent, which he said is the interest rate for banks when they borrow from the federal government.

“If you are Bank of America or J.P. Morgan/Chase, you go to the federal reserve,” Blumenthal said. “[The bank wants] billions of dollars of loans. How much does the federal reserve charge you? One percent. Why are you paying 3.86 percent when the big banks can borrow 1 percent? Give the students the benefits of the rates that the big banks have.”

Blumenthal said that any student loan reforms in the Senate would be challenging to pass.

“This is unfortunately due to partisan gridlock,” he said.

He said the previous bill to reduce all rates to 3.86 percent was blocked by other members of the Senate.

Blumenthal said that a measure he will be proposing would create a program that would forgive student loans in exchange for working at a public service job.

“Right now a lot of good people can’t do public service work because they have a lot of debt,” he said. “Instead of deterring people who have this debt we should be encouraging them to work in public service.”

Douglass said that NCCC advises students against taking out student loans.

However, NCCC Director of Financial Aid Services Lou Bristol said 5 percent of financial aid for current students comes from student loans.

“We had a 4 percent default rate over the past three years,” Bristol said. “One of the items that handcuffs us is the inability to say ‘no’ in particular situations. Three years ago I had a married student with their spouse who wanted to attend college here. One was $48,000 in debt and the other was $51,000 in debt. They wanted more. This was something taken under advisement and studied. A decision was made to not allow them to add to the debt that they have.”

Bristol said that colleges and universities should educate borrowers before they take out student loans.

“What comes to mind is financial literacy,” Bristol said. “They need to put some resources into that. A good consumer is a wise consumer. If we make that the number one goal everything else will fall into place.”

State Rep. Roberta Willis (D-64), who is the co-chairman of the state’s Committee on Higher Education, was present at the forum and spoke briefly about college loans.

“One of the things that is very unique about community college students is that they like to pay as they go,” Willis said. “They are very leery to take out loans to finance higher education. The longer that it takes for a student to graduate, we know that it’s a barrier to get to the promised land of an associate’s degree. The cost of taking out a loan is in itself a deterrent. Bringing down interest rates might help students stay in school and complete their education.”

Willis said that she is frustrated that student loans create a barrier for graduates that prevents them from buying a house or a car.

“To me, business and industries should be looking to help lower interest rates,” Willis said. “Right now, carrying that large debt is just the beginning. For some of these students going into graduate school you are talking six figures. You have a graduate degree and go out for a great job but you still can’t buy a house.”

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