Student Loan Debt Relief Alternatives
How many scary, negative, worrying articles are we bombarded with daily about the “student loan crisis”, and how few do we read about the potential alternatives for a solution to this crippling problem.
We know what studies show, we know that student loan debt has grown to over $1.2 trillion and continues to climb. We know that 7 out of 10 graduates leave college with a little over $33,000 in 2014 making it the most indebted class in history.
But where are the solutions? Where is the action plan? Expanding forgiveness programs that only reach a few borrowers may be a start, but it’s not going to fix the root of the problem.
This student loan debt “bubble” is already triggering other financial crisis in the country as young adults and recent graduates struggle to pay their loans, and delay making important decisions, like buying a home, a new car, and even starting a family.
The federal, state and local governments have taken a number of steps to provide aid in the form of scholarships, grants, loans and repayment assistance programs. In Maryland, for example, the state’s Janet L. Hoffman Loan Assistance Repayment Program provides loan repayment assistance for graduates working in high needs areas in targeted fields such as medicine, education and law. In Fiscal Year 2013, 193 awards were made through that program; loan repayments totaled more than $1.2 million, with an average award of roughly $6,400 per recipient.
Recent policy changes to student loan regulations have also been adopted to try to curb the rising cost of college tuition. But these initiatives are insufficient to control the mounting debt facing current college students, and some students are discouraged from pursuing a college education altogether in the face of undertaking large student debt. Student debt has also been shown to take a negative toll on the economy by, among other things, preventing some from qualifying for home loans and saving for retirement.
While the public sector has attempted to confront student debt, it has not sufficiently engaged the private sector to address these issues. Companies should offer their employees assistance in loan repayment — in addition to any college tuition assistance program. By adding loan repayment to tuition reimbursement programs, employers can help cover both past and future costs of education incurred by those employees pursuing higher education. There are approximately 1.3 million corporations with 25 or more employees in the U.S., and if significant numbers of these companies provided such programs, the student debt crisis could be reduced by 30 percent to 40 percent of the current student debt. Employers would likely reap the benefits of loyal, appreciative and productive employees who are less stressed and would not require supplemental part-time employment to pay back loans.
Such employer driven programs could have a greater impact and become more prominent if implemented in collaboration with the state through public-private partnerships, and if offered simultaneously as benefits available to all workers. For instance, the public sector can provide incentives, such as tax benefits or preferential procurement points for companies that offer student loan repayment programs to qualified employees. Engaging major trade associations such as the American Council of Engineering Companies (engineering), the Water Environment Federation’s Annual Technical Exhibition and Conference (environmental), the National Association of Manufacturers (manufacturing) and the Transportation Research Board (transportation) would raise awareness and encourage industries to develop and implement these programs.
According to the Institute for College Access and Success, in 2012, the average Maryland college or university bachelor’s degree recipient had $25,951 in student loan debt at graduation. Even modest monthly contributions from employers could shave years off of repayment and save students thousands of dollars in interest. Using the Janet L. Hoffman Loan Assistance Repayment program as a model for private companies could greatly reduce the amount the average Maryland student would pay back in interest and the time it takes to pay back to loan overall — to within five years. While these incentives may have costs in the short run, they will greatly benefit the future of Maryland’s economy and workforce.
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