Gov. Walker touts expansion of student lending

Madison — Gov. Scott Walker on Tuesday touted efforts to expand student loan refinancing by Wisconsin banks and credit unions.

Speaking at UW Credit Union's headquarters, the Republican governor said his administration is helping the Madison lender serve more borrowers who didn't go to a University of Wisconsin System campus.

But in highlighting those steps and a new state website for student borrowers, Walker stopped short of a broader refinancing plan favored by Democrats to address rising student debt.

"Under this plan we're announcing today, any student would be eligible to take advantage of these very competitive rates," Walker said.

The average college student in Wisconsin finishes with tens of thousands of dollars in debt that can complicate the graduate's attempts to marry and buy a home or car.

Previously, UW Credit Union was open to past and present students at UW System schools as well as Madison College, formerly Madison Area Technical College. But last month the state Department of Financial Institutions — the regulator overseeing UW Credit Union — allowed the lender to start serving any state resident who had attended any accredited university or college, even private schools and those outside Wisconsin.

Walker and state Financial Institutions Secretary Lon Roberts said the administration would look for other opportunities where state regulators could allow new lenders to enter the market and serve student borrowers.

UW Credit Union refinances private and federal student loans but hasn't always been able to connect with borrowers that could use its services, President and Chief Executive Officer Paul Kundert said.

"The biggest challenge that we've faced is getting awareness," Kundert said.

UW Credit Union started refinancing student loans in May 2013 and has a portfolio of $20.4 million in refinanced student debt, along with $113.7 million in loans made to current students, said Lisa Girdharry, the credit union's chief marketing officer.

It's not easy to predict how much the change might expand lending by UW Credit Union, which refinanced $8.9 million in student loans last year for 317 borrowers, Girdharry said.

That is just a fraction of the student loans in the state. President Barack Obama's administration has said as of January 2015, about 815,000 borrowers in Wisconsin owed a total of $19.3 billion in higher education debt.

Walker said the state website would help lenders connect with borrowers by listing the 13 state-regulated banks and credit unions in Wisconsin that offer student loan refinancing.

UW Credit Union is offering to refinance loans at fixed interest rates as low 4.04% but Kundert said that not all borrowers will necessarily qualify for those terms or for any refinancing. Though borrowers may not need to offer any collateral, they will need to show certain credit scores as well as a certain level of income or employment history, he said.

Scot Ross, executive director of the liberal group One Wisconsin Now, said he didn't believe these steps would be enough to address the growing burden of student loan debt in the state.

For years, Ross has advocated for a larger response in which a state-sponsored entity would help to provide refinancing options for borrowers. He said Walker's reliance on private lenders would not address the whole problem.

The quasi-public authority proposed by Democrats like Ross would aim to do for student loan refinancing what existing state programs operated by the Wisconsin Housing and Economic Development Agency do for mortgage refinancing.

As proposed, the authority would not use tax dollars to refinance the loans, but rather sell bonds in investment markets and then use the money raised to make loans to individual borrowers. The principal and interest paid by those borrowers would then be used to repay investors. Democrats say that would allow for more favorable terms for student borrowers.