Tackling Student Debt Where It Hurts the Most

Posted By Monica Harvin on January 4, 2016 at 2:24 pm
Tackling Student Debt Where It Hurts the Most
Kalamazoo, Michigan, one of many cities across the country taking action to address the cost of higher education and reduce how much debt students take on.

Hampered by student debt, many college graduates are asking for a lifeline to help them do things like buy homes, start businesses, save for the future, pay their other bills and actively participate in their local economies. With the recent increase to the federal interest rate, student loan debt is slated to become even more costly in the absence of action to the address the problem.

Because of this, actors at all levels from private employers to individual states are taking it upon themselves to help tackle the student debt problem. Now, with the release last year of the student debt map, it seems the local impact has become clearer than ever before. Cities and counties, too it seems, are assuming responsibility to help local residents lower student debt and the cost of education.

GoodCall describes here three different ways that locally-driven initiatives have taken hold to address the issue of student debt.

Local loan authorities

Many states have realized the tremendous burdens that student loan debt is placing upon its residents. States like Rhode Island have established their own student loan refinance programs to help residents lower these burdens. Now, hyper-local versions of these programs are also sprouting up in places like Montgomery county Maryland, where city leaders recently moved to obtain legislative permission to establish their own loan authority.

According to the Washington Post, state lawmakers believe that if municipalities join in to offer residents opportunities to lower their student debt loads, then “a broader variety of people could benefit from lower rates, especially those who carry private education loans.”

However, borrowers who seek to lower student loan debt should be aware that refinancing through private, federal, state or local authorities could potentially mean giving up certain benefits, like access income-based repayment plans, public-serve loan forgiveness, and teacher loan forgiveness, to name just a few.

Promise cities – Kalamazoo and Richmond

Other cities are tackling the problem by lowering the cost of getting a degree, and thereby helping lower how much debt students take on in the first place. In places like Kalamazoo, Michigan, all high school graduates of Kalamazoo district public schools receive free tuition or discounted tuition to attend Michigan’s public two-year and four-year colleges and universities.

The program, called Kalamazoo Promise, determines the amount financial aid based on the number of years enrolled in Kalamazoo public schools. Students who attend from kindergarten to 12th grade are eligible for 100% tuition benefits, while students who began attending a Kalamazoo public school by at least the 9th grade are eligible for partial tuition benefits, in accordance with years attended.

In Richmond, California, a similar program was approved late last year by the city council. Though the Richmond Promise program provides less aid – $1,500 per year to each graduate of Richmond’s high schools, it includes not only public school students but also those who attended charter and private schools. Richmond students can also use their benefits for two or four-year degrees.

City councilmember and former mayor of Richmond, Gayle McLaughlin tells GoodCall in an email, we know that “given the obscene cost of going to college these days,” Richmond Promise represents only a small help in offsetting the costs of going to college and lowering student loan debt, “but every little bit helps.” The city’s decision to provide broader access to more students generated some controversy, as it came at the expense of lowering the amount available to each student. Though, nevertheless, she says the program, “showcases our commitment, as a City, to encourage every student to rise to their potential and seek new horizons with higher education.”

Like Promise students in states like Tennessee and Oregon, students in cities like Kalamazoo and now Richmond will receive funding that, in the very least, means several thousand dollars they won’t have to take out in loans.

Financial education and empowerment

Cities like Denver, Colorado, are taking a different approach to addressing student debt by helping residents get the financial knowledge they need to make smart financial decisions, pay down debt and build savings. To do this, the city created the Office of Financial Empowerment with the focus of helping residents build safety nets.

In a public statement, Mayor Michael Hancock described the office’s mission as making “economic mobility a priority in the city, bringing together the experts who can help address the financial issues that test so many in our city, from our young graduates carrying student loan debt to our aging grandparents trying to survive on a fixed income and so many of their children.”There are 11 empowerment centers throughout Denver, where residents receive financial education and coaching at no cost. To date, the centers have helped nearly 3,000 people cut down their debt loads by almost $2 million and build $500,000 in new savings, according to the

There are 11 empowerment centers throughout Denver, where residents receive financial education and coaching at no cost. To date, the centers have helped nearly 3,000 people cut down their debt loads by almost $2 million and build $500,000 in new savings, according to the city.

Student debt is a local problem

As the student debt problem continues to affect the ability of graduates to invest in their local areas, cities around the country are likely to take notice and action by implementing their own strategies for addressing a problem with significant local impact. Take, for instance, the fact that millennials are not buying homes because of high student debt loads or lack of savings because they have paid off student loans. This has an impact on local taxes and, consequently, school funding that comes from homeowners’ taxes.

What’s more, student debt may be standing in the way of starting businesses for many would-be entrepreneurs – another important source of income as well as jobs and opportunities for local investment.

The form local action takes and its effectiveness will likely to vary from city to city. However, the need for it has been made more than clear. Local communities can no longer ignore student debt and will increasingly take steps to lower student loan debt by helping graduates pay it down, providing financial education and services to local residents, or by reducing early on how much debt students must take on to earn degrees.

Monica Harvin
Monica is a GoodCall contributing editor, covering personal finance and education. She's also GoodCall's diversity expert, with a master's degree in Latin American studies from UCLA and bachelor's degree in history from the University of Florida.

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