As we all know, going to college is expensive. For many families, the cost of attending college has been financed through credit – relying on the government or private lending institutions to provide the money. While that credit is important to meeting the needs of a college student, that debt does have to be paid back.
Nationwide, these college loan debts now total $1.5 trillion – far more than any other line of consumer credit outside of home mortgages.
It’s not hard to understand how this impacts Americans: For those who took out the loans, that credit must be paid back and that can undermine financial stability – and future career choices – of those families and the students themselves.
Tackling that problem has been near the top of the Congress’s agenda. In March, the Congress passed legislation that provided more than $36 billion to institutions of higher education to help with the costs associated with grappling with the COVID-19 pandemic. Colleges and universities received their funds based on a formula that considered the number of students enrolled, with a weight for lower-income, needy students.
The new federal law allowed institutions to cancel debts – incurred during the pandemic – that the students owed to the institutions. It did not allow institutions to cancel all federal student debt. Federal student loans account for most of the outstanding student debt, with private loans and institutional debts making up the remainder. Currently, payments and interest on federally held student loans are suspended until the end of September, providing some breathing room for those with college debt. New York U.S. Senator Schumer is pushing for an elimination of all student debt, but as yet the Congress has not acted (although hearings on the topic are scheduled for next month).
But Congress’s action earlier this year is impacting the nation: Across the country, colleges and universities are cancelling pandemic-driven debts students owed to those institutions.
Here in New York, college borrowers carry an average balance of nearly $36,000 — though that’s lower than the average borrower in the U.S. (nearly $37,000). Overall, there are 2.7 million student loan borrowers in New York, with debt totaling nearly $100 billion. Not all of the student loan borrowers are in their 20s and 30s; many have been forced to extend their student debt well into middle age.
Those attending public colleges and universities typically have less debt, since attending those institutions is less expensive. In the City University of New York system for example, the average debt balance is about $2,000. Yet, given that CUNY students are far more likely to be economically disadvantaged, paying to attend can be a strain.
The pandemic has made it worse. CUNY student debts nearly doubled during the pandemic.
The City University announced last week its program to use federal stimulus money to finance some student institutional debt forgiveness. All outstanding tuition and fees — such as the technology and activities fees —for the spring 2020, summer 2020, fall 2020 and spring 2021 semesters are eligible to be forgiven for qualifying students.
It’s estimated that 50,000 CUNY students will be eligible to have their student debts cancelled under the initiative and that the program will wipe out up to $125 million in unpaid student debt.
CUNY students with proven financial hardship, including students eligible for Pell Grants, will automatically have institutional debt created by tuition and fees covered without the need to apply. Qualifying students who already paid their tuition and fees will be eligible for a onetime $200 reimbursement.
Students at publicly funded universities typically pay hundreds of dollars in fees each semester, costs that are typically not covered by financial aid or scholarships. The CUNY program will cover those costs if they are an outstanding debt in a student’s account.
The State University of New York (SUNY) is also developing its plan to grant relief for outstanding tuition and fees incurred by students during the pandemic. They have already begun providing relief – SUNY has stated it has provided relief since the beginning of the pandemic totaling over $500 million. Its institutional debt forgiveness plan is next.
These are undoubtedly important and positive steps to offset the financial hits that college students and their families have experienced since last spring. But it also raises another issue: Should public colleges and universities be charging tuition at all?
A century ago, the nation established a system of universal education that helped the nation to transform itself into a world leader. Given the complexity of modern society, should that goal be extended through college?
We say yes. But in the short term, giving college students and their families financial relief is a welcome move.
Blair Horner is executive director of the New York Public Interest Research Group.
The views expressed by commentators are solely those of the authors.They do not necessarily reflect the views of this station or its management.