From out of nowhere, the last couple of weeks have presented a flurry of ideas from very powerful people on ways to attack student loan debt. For a higher ed practitioner and commenter like me, it’s an exciting time.
This weekend, governor Andrew Cuomo, of New York, was the latest. He’s proposing a tie-the-peasants-to-the-land approach to loan forgiveness, in which students who meet multiple criteria will have the first two years’ of payments made by the State of New York. The students must have attended and graduated from colleges in New York, must make less than $50,000 a year, must still live in the state, and must be enrolled in the federal income-based repayment plan for their loans. Students who drop out before graduating would not be eligible, nor would students who moved out of state. And unless I missed a key detail, the plan applies both to public and private colleges.
It offers plenty to like, and if the alternative is the status quo, I’ll take the Cuomo proposal. But by virtue of being tied to a single state, it sets a dangerous precedent.
The good is clear. New graduates are often at their most economically vulnerable, since the first good job is often the hardest to get. In shaky economies -- I’m thinking here of the upstate region particularly -- risk is unevenly distributed, with a disproportionate burden falling on the young. (It’s much easier to do a hiring freeze than to do layoffs.) A brand-new graduate with significant debt is at a real disadvantage, and in a uniquely vulnerable position. Giving a couple of years’ worth of breathing room can make a difference. And to the extent that it calls attention to income-based repayment as an option -- often a very good option, but one that many don’t seem to know exists -- well, that’s hard to object to.
But as with so many narrowly-targeted programs, it’s both complicated and at odds with itself.
“Complicated” is almost a given. If a student graduates a community college, enrolls, and then moves to a four-year college, does she get a second shot? How many semesters or credits must a student be enrolled at a New York college? (For example, if someone transfers in from, say, Connecticut, is the benefit pro-rated?) What happens to students who move on to graduate school or medical school? These are all answerable, but each brings its own requirements for monitoring, verifying, and the like. Those costs don’t help students.
The part that’s sticking in my craw, though, is the part about remaining in the state.
I don’t blame the governor for that, necessarily; it’s probably a concession to political necessity. But it puts a ceiling on young people’s aspirations, which is exactly the wrong thing to do.
A new college grad is looking at opportunities everywhere, and rightly so. We need them to do that. Those are the years of maximum mobility, when students can and should follow opportunity wherever it leads. That may involve remaining local, as in the case of most community college graduates, or it may involve moving across state lines to join a hot startup or enroll in a top program. Tying people to one state will reduce their options and, in the aggregate, their productivity.
New York is a relatively big state, so the effects may be less egregious there than in some other places. But the prospect of state-by-state protectionism, which this proposal portends, is not pretty. (Possible headline: “Proposed Policy Portends Protectionism.”) If states start putting golden handcuffs on graduates, the effect over time can only be negative.
If New York wants to help attack the student loan problem -- a worthy goal -- it has much easier, more effective, and fairer weapons at its disposal. At the most basic level, it could increase its operating aid to public colleges and universities. Interrupting the drift of cost-shifting from states to students would reduce costs for all students, including those who drop out and return later, and ti would do so without having to create an entirely new administrative infrastructure. Building up the quality of public offerings puts competitive pressure on private colleges to do a better job of justifying their tuition premiums, which is a good thing from a cost-control perspective. And cutting costs for all students, rather than only those who graduate, addresses the reasonable objection that graduates are, on average, wealthier than those who don’t finish.
Alternately, if New York would rather go through students than go directly to colleges, it could add or beef up scholarships for whichever students it wanted. New York has a history of Regents scholarships, so the precedent is well-established. That would benefit students on the front end, rather than the back end, and would still leave students free to follow post-college opportunity wherever it leads.
Using loan forgiveness can also have the unintended effect of legitimizing debt as the preferred method of paying for college. After all, if you put down money on the barrel, you get no help. But if you borrow, you get your payments made for you. Given the choice, which would you do?
Loan forgiveness is much likelier to work at the Federal level, where the issue of graduates moving from one state to another wouldn’t matter. If I remember my constitutional history correctly, matters of interstate commerce are properly left to the Feds. If states start building walls around their own graduates, I see a whole lot of friction entering an already difficult job market. That can’t be good.
Still, if you drop the requirement to stay in state, the proposal has much to commend it. And I’m heartened to see serious attention being paid to the consequences of the decades-long cost shift from states to students. Instead of complicated and clever solutions, though, I’d be much more enthusiastic about something a little more straightforward. Stop the cost shift.