Last week, President Biden stated he is considering cancelling some amount of student debt and expects to make a decision on the issue in the coming weeks.1 Federal action to cancel student debt would particularly benefit Maine residents, who carry far more student debt than the average American, and would have outsized positive impacts for Black families, women, and people with little or no wealth. This cancellation would correct a decades-long trend of out-of-control student debt levels that have prevented Maine residents from buying homes and starting families, among other impacts. However, as significant as it would be, a one-time debt cancellation will not solve the problem going forward. Fortunately, this session Maine lawmakers took significant steps to limit the student loan burdens Maine residents will accrue in the future. To grow our economy and increase equitable access to good jobs, Maine should build on these successes and continue to seek ways to lower the cost of higher education.
Maine borrowers, especially older debtors, need relief more than most
According to The Institute for College Access and Success (TICAS), Maine was in the top 10 states for 2020 graduates’ average student debt at $32,764. Nearly two-thirds (63 percent) of graduates had student debt, which was eighth highest in the nation.2 (These figures do not include for-profit institutions which only report limited data but have been found to leave students with higher debt loads and higher rates of default.) The state’s share of the cost of higher education has been on a steady downward trajectory since the late 1980s, leaving students and families to cover the difference. In 1989, the state covered 78 percent of the cost of full-time-equivalent enrollment. Over the past decade, those costs have been evenly split, leaving more students and families in debt.3
While student debt has particularly impacted recent generations of college students, borrowers age 60 or older are among the fastest growing segments of the student loan market. While many carry debt from their own education, most older borrowers hold debt that financed their children and grandchildren’s education.4 For seniors with fixed income, ballooning student debt has major consequences for financial wellbeing, including default and social security garnishment, particularly at a time when the prices of basic expenses are rising.5
According to an August 2017 report by the Consumer Financial Protection Bureau (CFPB), between 2012 and 2017 the number of student loan borrowers age 60 years or older in Maine rose from 14,304 to 20,928, a 46 percent increase.6 During that period, the median balance for older student debtors in Maine increased from $16,732 to $23,599, a higher average balance than any other state in the nation. As of 2017, Mainers age 60 or older held more than half a billion dollars in student loan debt.
Women and Black borrowers are disproportionately impacted by student debt
According to the Brookings Institution, Black borrowers with undergraduate degrees default at five times the rate of white borrowers (21 versus 4 percent) and are more likely to default than white borrowers who do not complete their degree. In 2017, the Center for American Progress found that 12 years after entering college, the typical Black student who started in the 2003-04 school year and took on debt for their undergraduate education owed more on their federal student loans than they originally borrowed. Nearly half of Black borrowers defaulted, including 75 percent of those who dropped out of for-profit colleges.7 These inequitable outcomes are due to a combination of factors, including the higher enrollment of Black people in for-profit institutions, lower family income and wealth, and lower post-graduation earnings.8
Defaulting on a student loan has severe economic consequences, triggering wage seizures, poor credit scores, and debt collection proceedings. One in five Mainers with student loan debt has had their wages or income tax refund garnished or their social security check taken away to pay for their student loans.
In Maine, young women have particularly struggled under the burden of student debt. A 2018 MECEP-commissioned survey found that nearly two-thirds of women had struggled to make a student loan payment in recent years. Sixty percent of women under the age of 35 reported experiencing four or more negative impacts from student loans, such as being unable to afford basic necessities, delaying buying a home, or reducing retirement savings.9
While many student borrowers carry high debt loads — the average for 2020 graduates in Maine is more than $32,000 — people with smaller debts have experienced some of the worst impacts. Nationwide, people with student debts below $6,000 defaulted 50 percent more often than people with larger debt loads of more than $24,000.10
Student debt holds back job creation and home ownership
Maine’s college graduates owe nearly $6 billion in federal student loan debt, causing myriad drags on our economy. In an October 2018 survey, 42 percent of Mainers with education debt reported delaying buying a house. More than half said they were delaying buying a car, which restricts the ability of workers to get to jobs. One in four were choosing to delay starting a family, exacerbating Maine’s demographic concerns. More than 40 percent knew someone who moved to another state to take a job that better equips them to pay off their loans. Writing off the student debt of Mainers would support around 6,000 jobs and generate $726 million in spending at local businesses.11
Maine lawmakers took bold steps to limit student debt and expand access to higher education
While federal student debt cancellation would have outsized positive impacts for working Mainers, a one-time debt cancellation alone will not solve the problem of runaway student debt. To attain an accessible system of higher education that does not leave students mired in debt, the state will have to continue increasing its share of the costs.
Fortunately, state lawmakers have taken bold steps to reduce the burden of higher education that is placed on students and their families. Governor Mills also moved to ensure that recent Maine high school graduates and people earning high school equivalents can enroll this year or next in Maine community colleges tuition free. For Maine residents who have student loan debt, including people who will still have debt after the Biden administration’s potential cancellation, lawmakers reformed a state tax credit to effectively reimburse Maine student loan holders for up to $2,500 in student loan payments per year, up to a lifetime maximum of $25,000. In the 2021 budget, lawmakers increased the award amount from the Maine State Grant Program from $1,000 to $2,500, a considerable expansion of financial aid for students from families with low income.
Another way lawmakers are helping to ensure students aren’t losing ground is a bill that reforms the practice of transcript and diploma withholding, which will allow thousands of Mainers who owe money to colleges and universities to get back to school and pursue their chosen career. Until now, when students have owed small amounts to universities and colleges, those schools have withheld transcripts and diplomas, limiting the ability of students to transfer credits, pursue graduate degrees, or take their credentials to the job market. This new law removes that counterproductive barrier.
While these steps will significantly improve access to higher education, we need to continue making progress to ensure Mainers do not continue to accrue unsustainable mountains of debt. Continuing to expand the Maine State Grant and making permanent the new initiative to offer tuition-free community college will expand educational and financial equity and help grow our economy by investing in the skills of workers.
Notes:
[1] Washington Post, “White House officials weigh income limits for student loan forgiveness,” April 30, 2022, available at https://www.washingtonpost.com/us-policy/2022/04/30/white-house-student-loans/.
[2] “Student Debt and the Class of 2020,” The Institute for College Access and Success, November 2021, available at https://ticas.org/wp-content/uploads/2021/11/classof2020.pdf
[3] https://www.mecep.org/blog/covid-compounds-maines-education-debt-crisis-the-time-to-act-is-now/
[4] “Snapshot of older consumers and student loan debt,” Consumer Financial Protection Bureau, January 2017, available at https://files.consumerfinance.gov/f/documents/201701_cfpb_OA-Student-Loan-Snapshot.pdf
[5] https://www.gao.gov/products/gao-17-45
[6] “Older consumers and student loan debt by state,” Consumer Financial Protection Bureau, August 2017, available at https://files.consumerfinance.gov/f/documents/201708_cfpb_older-consumers-and-student-loan-debt-by-state.pdf
[7] Ben Miller, Center for American Progress, “New Federal Data Show a Student Loan Crisis for African American Borrowers,” October 16, 2017, available at https://www.americanprogress.org/article/new-federal-data-show-student-loan-crisis-african-american-borrowers/
[8] Sandy Baum, American Council on Education, ”Student Debt: The Unique Circumstances of African American Students,” February 2019, available at https://www.equityinhighered.org/resources/ideas-and-insights/student-debt-the-unique-circumstances-of-african-american-students/
[9] Lake Research Partners. Student Lending Reform: Findings from a Survey of 400 Maine Adults with Education Debt, November 2018. Available at: https://www.mecep.org/wp-content/uploads/2018/11/MECEP-CRL-Student-Loans-and-Lending-PollNovember-2018.pdf.
[10] Judith Scott-Clayton, Brookings Institute,” The looming student loan default crisis is worse than we thought,” January 2018, available at https://www.brookings.edu/research/the-looming-student-loan-default-crisis-is-worse-than-we-thought/
[11] Jody Harris, Maine Center for Economic Policy, “Predatory actors worsen borrowers’ woes as debt holds back ME economy,” December 2018, available at https://www.mecep.org/wp-content/uploads/2018/12/Policy-Brief-Education-Debt-in-Maine-121018.pdf
