Recent college graduates living in this state could have their loans forgiven
Employers and policy makers are increasingly betting that the way to the hearts of young people is through student loan forgiveness.
New York state is the latest entity to launch a program to help young people better manage their student loans. The state’s initiative is unique in that it’s tied solely to income, a rarity among debt relief programs, which typically require borrowers to choose a specific career or make a certain purchasing decision, such as buying a home, to qualify. The state began taking applications last week for its Get on Your Feet loan forgiveness program, which will make up to two years-worth of federal student loan payments for residents who graduated from a college or university in New York state after December 2014, make less than $ 50,000 a year, graduated from a New York state high school and are enrolled in one of the federal government’s income-based repayment programs, among other requirements.
Officials wrote in January of last year that they expect 7,100 college graduates will take advantage of the program in its first year. By 2019 or 2020, they expect that 24,000 people will be participating every year. Once the initiative is in full effect, officials estimate it will cost about $ 41.7 million.
Most states in the country offer some sort of student loan forgiveness program, according to personal finance site CollegeInvestor.com, but they’re often tied to occupation to encourage residents to pursue certain jobs in the state that may be low-paying or that the state may have a shortage of.
“We’ve already had a lot of states use student debt relief as a carrot to entering certain professions,” said Mark Huelsman, a senior policy analyst at Demos, a left-leaning think tank. “Now that most professions have student debtors in them you’re going to see broad-based relief plans,” like New York’s, he said.
New York’s is it’s linked specifically to income, so anyone making a relatively low salary — whether it’s an artist working out of a loft space in Bushwick or a nonprofit researcher toiling away in midtown — qualifies. The debt relief isn’t all altruistic; it’s an aim to help college graduates cope with entry-level salaries in a state with a high cost of living, in hopes they’ll stick around until they’re making more money and can contribute to the region’s economy and community.
By linking the debt forgiveness to enrollment in the federal government’s income-driven repayment programs, New York officials were to create a program that’s “squarely targeted at the middle class,” said Huelsman. That’s because borrowers with extremely low incomes who enroll in income-driven repayment programs could have payments as low as zero, so to benefit from New York’s offer a borrower would need to be making enough that they still have a relatively significant monthly payment under an income-driven plan, but still be making less that $ 50,000 a year.
In unveiling the initiative last week, Democratic Governor Andrew Cuomo framed it as an economic development program of sorts, saying, “we are telling recent graduates: if you invest in New York’s future, we will invest in yours.”
Companies across the country are making a similar bet, offering to pay off a portion of employees’ student loans in hopes the benefit will lure top talent and convince them to stay. Other states and localities are looking for ways to help borrowers refinance their student loans at lower interest rates in hopes the perk will make it easier for them to put down roots and contribute to the area’s economy.
All of these programs are an indication of the prevalence of student debt and the challenges it’s placing on borrowers. Now that borrowing for higher education has essentially become a universal American experience, research indicates that student loan bills are keeping young people from buying homes, saving for retirement or emergencies or forcing them to choose jobs they find meaningful but that don’t pay enough to make student loan payments manageable.
“Student debt has become a household burden in a way it wasn’t a decade ago, I think you’re going to see states respond to that,” Huelsman said.