Some States Aren’t Waiting for Federal Action to Help Residents With Student Loan Debt
Posted By Donna Fuscaldo on April 11, 2016 at 12:59 pm
Student loan debt’s impact goes far beyond individual finances. It also affects both the national and local economies as graduates put off purchasing a home or saving for retirement. And with more than 40 million people owing on average $30,000 in student loan debt, politicians are increasingly realizing something has to be done.
One answer, at least in the eyes of New York State and Illinois, is to forgive, repay or refinance a portion of a graduate’s debt to make it easier for them to get out from under what can often be crippling student loans. “It’s an encouraging step,” says Marc Cohen, chief of staff at Student Assembly of The State University of New York, of New York State’s “Get On Your Feet” program announced late last year. “Student loan debt is more burdensome than credit card and auto debt combined. This helps students to start their lives off on the right foot and not carry cement on their feet.”
New York starts accepting applications for “Get On Your Feet” program
Late last year, New York Governor Andrew Cuomo announced it would start accepting applications for its “Get On Your Feet” loan forgiveness program in which college graduates can get up to 24 months of federal student loan debt relief. Graduates have to live in New York State and already be participating in a federal income-driven repayment plan in which payments are typically capped at 10 percent of their discretionary income.
The program is supplementing the federal “Pay As You Earn” loan repayment program by allowing eligible college graduates that reside in New York to pay nothing on their student loans for the first two years out of school. Recipients will have a maximum of 24 months of their student loan repayment paid for them. In order to be eligible, graduates have to have earned an undergraduate degree from a New York state-based college or university in or after December 2014 and have adjusted gross income of less than $50,000.
“Studies have shown time and time again that helping students pay for college is critical to ensuring their success after graduation,” said Cuomo when announcing the program has started accepting applicants. “Students who graduate with debt are less likely to start a small business or to purchase a home, and the consequences of defaulting on student loans can prevent a person from ever realizing their goals.”
Illinois, California working on programs of their own
New York State isn’t alone in tackling the student loan debt crisis. In March, Chicago Aldermen Edward M. Burke (14th) and Margaret Laurino (39th) called on the Chicago City Council to convene hearings to explore remedies to the student loan debt crisis, which is hitting Illinois hard. According to the Aldermen, Illinois ranks 16th among states with the highest debt burden, with the average debt standing at $28,984. What’s more during the last ten years, student debt has more than doubled for those attending Eastern Illinois University, Illinois State University, Northern Illinois University, Southern Illinois University at Carbondale and Western Illinois Universities.
“These hearings would query local companies and school officials on what plans they have to attract young workers by offering student loan repayment benefits,” Alderman Laurino said when announcing the hearings. The politicians pointed to a survey sponsored by Peanut Butter Inc. that found 36 percent of respondents said they would stay at their employers longer if the company helped them with their student loan debt.
California also has a program on the books dubbed the California Student Loan Refinancing Program in which eligible students can refinance student loan debt to more favorable interest rates. Many of the programs are state-focused and are partly an effort to keep graduates in their states.
“Refinance programs overall are a Band-Aid fix to the student debt crisis, however, anything that will help lower payments for borrowers today is a good thing, while we work on stronger reforms,” says Natalia Abrams, executive director of Student Debt Crisis. “The one thing borrowers should be careful about is refinancing federal loans into private loans because you lose many of the benefits and protections provided to federal loan borrowers. Unfortunately, many state-based student loan refinancing programs push borrowers into private loans, which are obviously much more dangerous for borrowers.”
More still needs to be done at Federal level
While states are taking different approaches to tackling the student loan debt crisis most agree more needs to be done. Thomas J. Dalton, assistant vice president at Excelsior College, says anything that helps students get on their feet right after graduating is going to be welcome and will help, but there needs to be change at the Federal level, particularly the interest rates on student loans. “Currently, the interest rate is tied into the 91 day T-bill. It should be structured more like mortgages, a fixed and much lower interest rate,” says Dalton.
“Options like this certainly do help students, however, I believe this is more of a federal issue that needs to be addressed for all students in all states.”