Plan would slash higher-education costs
Students are awash in higher-education debt. Parents are frustrated that they can’t do more to help. Colleges and universities throw up their collective hands because they think there is little they can do. Banks point fingers at the students, blaming high default rates as the root cause of high interest rates. Students and parents lash out at banks, citing their greed in charging usurious rates.
It’s a cycle of frustration and despair. It is also a cry for action. Most students simply shake their heads, empty their bank accounts, pile up mountains of debt and cope as best as they can.
It’s time to rethink the problem. There is a desperate need for a realistic and cost-effective path forward to help students cope with higher-education costs that doesn’t rely on the charity of others.
Let’s take the first step. The General Assembly needs to act on the plan we introduced May 3, PA Student HELP (Higher Education Loan Protection) — a far-reaching, reasonable, responsible and progressive plan that would slash debt for tens of thousands of students.
PA Student HELP calls for refinancing high-interest student debt using up to $1 billion in bond financing. Early estimates indicated that more than 28,000 students would benefit from PA Student HELP.
In Pennsylvania today, there is $68 billion in outstanding student loan debt. Nearly 2 million Pennsylvanians carry student loan debt.
The average college student in Pennsylvania carries $36,000 in debt. Under PA Student HELP, a student could refinance their debt and save $10,000 over a 20-year loan repayment. PA Student HELP would achieve this savings by slicing more than 2% off the blended federal loan repayment rate of 6.25%.
The savings would be even more pronounced for students who financed their education through private lenders. These students, who carry an average $50,000 in debt with a 10% interest rate (the current average private lending rate), would save more than $43,000 from refinancing under PA Student HELP.
PA Student HELP includes a potential $500 per year tax credit against personal income tax liability. The program would make up to $10 million in tax credits available.
Employers also have a role to play in our plan. To retain valuable, educated staff, employers could make contributions into a 529 account and have these contributions credited toward reducing student debt. The program would also open the possibility for employees to deploy the cash equivalent of unused carryover days to retire student debt.
PA Student HELP would boost transparency and open additional tracts of financial data to students to better understand the cost of higher education. The plan would mandate that colleges provide students with an up-front estimated cost of a four-year degree. It also would require that an ombudsman be appointed to guide students and parents through the loan application process.
Students should not be swamped by excessive student debt. If left unaddressed, Pennsylvania runs the risk of losing generations of students and leaders who are interested in pursuing a college degree but cannot afford the cost.
It’s time that lawmakers on both sides of the aisle help tens of thousands of students save tens of thousands of dollars. It’s time for PA Student HELP.