Everyone’s talking about student loan debt — celebrities Scarlett Johansson and Kerry Washington, President and Mrs. Obama, Sens. Elizabeth Warren and Marco Rubio, and regular folks, too.
Nearly 40 million students have borrowed nearly $1.3 trillion, far exceeding credit card debt. Nationwide, 70 percent of new graduates have student loans, with average debt nearly $30,000. Here in Maryland, 59 percent of new graduates borrowed an average exceeding $26,000, according to The Project on Student Debt. Such debt is not limited to the young. According to AARP, some senior citizens are repaying student loans.
How did this happen? Tuition and fees for in-state students at the University of Maryland have increased twelvefold since 1980, from roughly $800 per year to $5,000 in the year 2000 to $9,600 today. Including room and board ($10,600), books and supplies ($1,100) and other expenses ($3,200), the total annual cost of attendance at our state’s flagship university now exceeds $24,000 for in-state students. Even for students who graduate in four years, the cost is nearly $100,000, however, Complete College America notes that less than 20 percent of students at public universities nationwide earn their degree within four years, thus adding more debt. The cost is higher at private institutions and in graduate programs where costs have also skyrocketed.
When new college graduates receive word that their grace period is ending and repayment beginning, many don’t know how much debt they’ve incurred. They don’t know if they have federal loans, which have protections and repayment options, or private loans, which often have higher, sometimes even variable interest and little flexibility. This debt has the potential for a chilling lifetime ripple effect on decisions regarding marriage, career, children, major purchases such as homes and vehicles, retirement savings and more.
The focus at Central Scholarship since our founding in 1924 has been on college affordability and price transparency. We are increasingly concerned about skyrocketing student debt and what it means in Maryland and nationally. While our focus is on helping low-income students in Maryland, our solutions would reach far beyond our constituency.
Our solutions for students and families include choosing a college wisely with net cost in mind, and staying on track to graduate in four years. Students should use existing tools to fully understand how much would be owed before ever borrowing. For example, the college cost comparison tool for students from the Consumer Financial Protection Bureau. Students and families should seek and apply for private and institutional scholarships to reduce the need for loans.
For students and families who must borrow, we suggest federal loans only, which offer many protections and repayment options. Students should explore federal, state and local repayment and forgiveness options, such as Public Service Loan Forgiveness, Pay As You Earn, Income Based Repayment, and Income Contingent Repayment, and in Maryland, the Janet L. Hoffman program. Students should research employer-based repayment options, such as the federal government employee loan repayment program of the Office of Personnel Management. Unless absolutely necessary, private loans, which often have variable and higher interest rates, should be avoided.
Our solutions for federal, state and local government include expanding loan forgiveness and repayment programs in workforce shortage or underserved areas. The federal government should expand the Pell Grant program, ensure that Pell Grants are limited to low-income students, prohibit awards displacement and link federal aid to college affordability. Borrower education should be improved both pre- and post-loan, interest rates reduced, bankruptcy protections restored and refinancing allowed. Currently, refinancing is only available through several online startups and a few private banks or credit unions, but not from the federal government.
We encourage partnerships between higher education institutions and industry to develop more cooperative education program opportunities where students alternate semesters of study and meaningful paid work experience in their field of study.
We challenge higher education institutions, government, employers and organizations, to develop additional innovative solutions, and we challenge students and families to become wise consumers, with a goal of eradicating this crisis.
Michele Waxman Johnson
is vice president of Central Scholarship. She writes from Owings Mills.