Student loan debt affects everyone
The United States is finally beginning to emerge from the Great Recession. The last jobs report had U.S. employers adding 248,000 jobs last month, well over the expected 215,000 economists were predicting. The unemployment rate dropped from 6.1 percent to 5.9 percent, falling below 6 percent for the first time since before the recession.
Minnesota has fared better than most states. Our unemployment rate in August was 4.3 percent, the lowest it has been in nearly eight years.
But it took almost six years to get back to where we were before the housing bubble burst. And our economy, many experts say, has been changed forever.
That's why, when some start talking about another bubble ready to burst and wreak havoc with our recovery, we ought to pay attention. And that bubble is the loan debt our college students and college graduates are burdened with.
National student loan debt is approaching a record $1.2 trillion and those numbers are headed in the wrong direction. One study shows that student loans accounted for 36.8 percent of the total debt load for consumers age 20-29 in 2014, up from the 12.9 percent reported in 2005.
Another study by the Consumer Financial Protection Bureau warned that growing student debt could have a negative effect on other sectors of our economy. Borrowers are less likely to put away resources for retirement, buy homes or new cars or start a business.
The effect this debt is having on the housing market isn't theoretical. John Burns Consulting, a homebuilders' adviser, reported that student loan debt is responsible for an over-$80-million drag on home sales.
In Minnesota, the average student loan debt this year was nearly $31,500, the fourth-highest in the nation.
Not surprisingly, efforts in Washington, D.C., to address this situation have been unsuccessful, thanks to partisan gridlock. Democrats introduced a bill that would have lowered the interest rate on federal student loans to 3.86 percent from the current 4.6 percent and allowed existing loans to be refinanced at that lower rate. Fifty-six senators agreed, but that was four votes short of beating back a GOP filibuster.
What Washington can't do, St. Paul must. That's why the DFL is already making it clear that addressing this looming issue should be one of the legislature's top priorities in 2015.
In 2013, we started work on this front. DFL lawmakers worked with the University of Minnesota and the Minnesota State Colleges and Universities systems to implement a two-year freeze on tuition and provide a $150 million funding increase for higher education — the first funding increase in eight years. We increased financial aid through the state grant program and passed legislation to allow the Office of Higher Education to refinance student loans.
Our ambitions are even greater for the session beginning next year. We want to extend that tuition freeze for another two years, taking us through 2017. That would ensure an unprecedented four years of flat tuition for Minnesota students after a decade of steep tuition increases.
House DFLers will be looking at additional opportunities to reduce student debt in 2015, such as:
+ Expanding the state's loan forgiveness assistance to college graduates that fill jobs in vital fields in nonmetro Minnesota. This initiative would target areas of Minnesota that are experiencing "brain drain" by helping students that return to their communities as entrepreneurs or in high demand jobs to pay off debt. Students would receive 20 percent of outstanding student loan repaid up to $3,000 per year if they are working in a qualifying job in nonmetro Minnesota. Based on successful programs in other states, it would serve to reduce debt and create a "brain gain" in communities across Minnesota.
+ Providing debt relief to Minnesota graduates that fill jobs in critical areas as part of ServeMinnesota, the state's administrator for AmeriCorps. This programs would expand opportunities within the ServeMinnesota program so that eligible graduates could have debt forgiven faster.
The future of our state rests in the hands of our future workforce. We need the best-educated workers in the world. Instead of punishing people who seek to further their education, we need to encourage them. Minnesota students who wish to go to college and receive a degree shouldn't have to face an insurmountable debt once they're handed a diploma.
This is one bubble we better keep our eyes on.
Erik Simonson (DFL) is the Minnesota state representative for District 7B.