April 22, 2018
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Federal program to make college more affordable

By Cliff Ginn and Rob Brown, Special to the BDN

With so much attention on health care, few have noticed that Congress just passed crucial legislation to expand educational opportunity.

Increasing access to higher education and training is the best way to prepare Americans with the knowledge and skills that the 21st century economy demands. Raising the proportion of degree holders in our work force is the best way to grow our economy. For individuals, every new level of educational attainment — from occupational certificate to associate degree to bachelor’s degree and beyond — translates into higher wages and lower likelihood of unemployment.

Unfortunately, the cost of higher education and training prevents many people from pursuing further education and training after high school. This is especially true in low-income, rural states such as Maine. Making college more affordable can help more people get over that financial hump, and will give our economy and businesses the skilled work force they need to thrive.

Over this last week, both houses of Congress passed a budget reconciliation bill that will make college much more affordable for Mainers and for the rest of the nation. It will increase the amount of Pell grants, which reduce the cost of college, and then effectively lower interest rates on the student loans that people use to cover the remaining costs. The bill will also reduce loan payments for people who have low incomes — a crucial protection at a time when student debt is at all-time highs and unemployment is widespread.

The bill accomplishes these things by eliminating the wasteful subsidized loan program, and replacing those loans with an expansion of the federal direct lending program. Under the subsidized loan program, the federal government provides billions of dollars in subsidies to private lenders to originate student loans, and then guarantees repayment of up to 97 percent. In the 1990s, the federal government established a direct lending program, which was able to make loans available much less expensively. Every $100 of loan costs the government $13.81 under the subsidized loan program, but only $3.85 under the direct lending program.

Moving from a mix of subsidized and direct lending to exclusively direct lending frees up $61 billion per year. $36 billion of that would go into increasing Pell grants in a way that keeps up with inflation. Without this infusion, Pell grants would have to be cut substantially, and 500,000 students would lose their grants, because so many people have chosen to go back to school during the recession; $1.5 billion would go to cap student loan payments at 10 percent of income. At a time when Mainers’ average student debt loads have risen to $25,000, this provides much-needed economic security for people taking on the risk of student debt to pursue higher education and training.

Tens of thousands of Mainers rely on Pell grants and student loans, and these sweeping federal changes will magnify Maine’s impressive efforts in making college affordable. The Opportunity Maine Program, a state income tax credit that effectively wipes out student debt for Maine college graduates, is the nation’s boldest universal higher education guarantee. The Competitive Skills Scholarship Program invests in helping low-income workers to finish a degree, certification, apprenticeship or on-the-job training program in high-wage, high-demand fields. The Parents as Scholars program helps public assistance recipients pursue higher education.

With the federal government stepping up to make college more financially accessible, now is the time for Maine to redouble its efforts to catch up with the rest of New England in educational attainment. Studies have shown that we have the lowest incomes in New England because we have the lowest proportion of degree holders in our work force. Our state agencies, high schools and colleges need to tell students — over and over and over again — that no matter what their life circumstances, they can build better lives through higher education. The Opportunity Maine, Competitive Skills Scholarship and Parents as Scholars programs will work only if Maine residents know about them.

If we drive this message home with our young people and help our many displaced workers pursue higher education and training, we can emerge from this recession more prosperous than we entered it.

Cliff Ginn and Rob Brown are co-directors of Opportunity Maine.

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