Nearly all of the future growth in good jobs in Maine will require education and training beyond high school. However, a large majority of those pursuing the education needed to be prepared for those careers have had to take on unsustainable levels of debt.
Student debt levels in Maine are already bad enough. In 2010, 68 percent of Maine college graduates went into debt to earn their degree, averaging $29,983 — the second highest student debt of any state and the highest as a percentage of income.
And, right now, Congress is on the verge of making things even worse. On July 1, the interest rate on many federal student loans is set to double from 3.4 percent to 6.8 percent unless Democrats and Republicans act soon. Sens. Olympia Snowe and Susan Collins both backed the College Cost Reduction and Access Act of 2007, the act that set the lower interest rate. However, extending the rate has become another in a long line of unnecessarily partisan fights in the Congress.
If Congress lets this interest rate double, 34,849 federal student loan borrowers in Maine will be affected, according to data from the federal Department of Education. For every year the lower rate is not extended, the average cost per borrower will increase by $980 over the life of the loan, sucking nearly $35 million in additional interest payments out of Maine’s economy.
That’s nearly $1,000 in increased costs per borrower per year, money that is not available to help young people start a family, purchase a house or a car or make other investments to get their life started. That’s an additional $35 million per year that isn’t supporting Maine’s economy.
Certainly, much more could and should be done to make higher education more affordable. Colleges and universities need to do their part to hold tuition and expenses in check. And individuals and families must borrow responsibly, borrow only what they need and avoid risky private loans, which come with much higher interest rates and few consumer protections.
Financial aid offices can help by making sure students exhaust any and all forms of federal aid before suggesting they turn to private loans. According to the Project on Student Debt, “the most recent federal data show that a majority of private loan borrowers could have borrowed more in federal loans before turning to private loans.”
Here in Maine, at least, it’s not all gloom and doom. Thanks to a citizen initiative a few years ago, Maine now has the boldest college affordability program in the nation.
The Opportunity Maine Program allows those who earn an associate or bachelor’s degree at a Maine school to be reimbursed for student loan payments through a state income tax credit for any years they live, work and pay taxes here after graduation. The value of the credit is capped at the rate of in-state tuition and fees at our public institutions, thereby encouraging responsible borrowing.
This is an incredibly valuable support for Mainers pursuing the education they need, but it doesn’t change the fact that more must be done to hold down the cost of higher education in the first place. In that respect, Congress needs to do its part to keep the cost of student loans in check.
This really should be simple. Something is wrong with the priorities in Congress when they will write a blank check for zero-interest loans to Wall Street but they can’t agree to provide a small amount of help to the millions of Americans trying to gain an education.
If Congress doubles the interest rate on federal student loans it will be responsible for saddling Maine borrowers with an additional $1,000 per year in interest payments, costing Maine’s economy nearly $35 million. Let’s encourage Maine’s Congressional delegation to break the familiar Washington, D.C., pattern and offer a bipartisan solution to prevent this.
Rob Brown is the executive director of Opportunity Maine.