Louisiana student loan debt now stands at $22.5 billion; Would undoing it solve the problem? | Business
Ashton Duplechain and his fiancée, Leigh Jolivette, left their longtime Lafayette home and moved to Kansas City late last year. Leigha got a job in medical billing, and they both felt the move was a no-brainer.
He found a job in a warehouse at a company specializing in medical supplies. This came with a nice pay rise, which will help them save money for their wedding. But paying for a wedding could end up taking longer than expected, and he points to a problem.
It’s about his $24,000 federal student loan debt with payments again due at the end of August.
“I’m actively saving for a wedding and just trying to pay for a living,” said Duplechain, who earned a degree in music education from the University of Louisiana at Lafayette. “What sucks is now I think I’m earning too much to qualify for a deferral.”
Duplechain is among 43.4 million Americans struggling with $1.7 trillion in debt, including 651,000 Louisiana residents who have student debt of $22.5 billion, according to Education Data Initiative.
How big is federal student loan debt? That’s nearly double what Americans had in credit card debt in 2020. That’s higher than Australia’s gross domestic product ($1.3 trillion in 2020).
Currently, refunds are suspended until August 31 thanks to an executive order from President Joe Biden, who continued the pause in refunds that began in March 2020 under former President Donald Trump. This is after Biden promised during his 2020 campaign to forgive undergraduate student loan debt of up to $125,000.
Since then, the White House has not ruled out this decision.
Having students in debt after graduation can be a hindrance for years. Ryan Cazares, owner of Scott Eye Care, graduated from the University of Houston in 2011 with a doctorate in optometry and $175,000 in federal student loan debt.
It wasn’t until he moved back in with his parents and drove an old car for a while that he was able to make the monthly payments of $1,400. He paid it back in seven years.
“Starting my business, I didn’t earn anything for two years,” he says. ” I do not think so [student loans are] fair. By the time you’re done, you’ve already sacrificed a lot, studying and putting all that effort into it. It stinks of having to make even more sacrifices after school is over.
“You want those coming into the workforce to contribute to the economy, and a lot of them haven’t been able to because they have that extra $1,000 payment to make every month.”
How we got here
According to DeWayne Bowie, UL’s vice president for enrollment management, college tuition first rose in 2008 after the Great Recession. In 2010, state funding for higher education in Louisiana was cut 16.7%, the largest post-recession cut, according to data from the Louisiana Board of Regents. From 2008 to 2022, the state contribution fell by 17.5%.
This has led to an increase in tuition and fees, up 138% post-recession through 2019, the data shows. Between 2008 and 2019, tuition and annual fees for the average student taking 12 hours per semester at least doubled at each of the state’s 14 universities. At UL-Lafayette, costs have almost tripled.
That forces students to take out loans, said Devante Lewis, director of public affairs and outreach at the Louisiana Budget Project, a public policy nonprofit. Fourteen percent of Louisiana residents have student loan debt, a figure that is the fifth highest in the nation, according to Education Data Initiative data.
Changing labor markets are also a reason for rising tuition fees and soaring debt. According to data from the United States Bureau of Labor statistics, jobs requiring a bachelor’s degree are expected to increase by 10% between 2016 and 2026.
Jobs requiring only a high school diploma are expected to increase by 5%. From 2020 to 2030, 18 of the 30 fastest growing occupations will require at least a bachelor’s degree to be hired.
“Our debt in quantity may not be as great as that of neighboring states… [but] you’re going to be debt-ridden almost until you die,” Lewis said. “People, even to access available jobs, have to enter our higher education system. The only way people have to afford a college education is to take out federal aid. Your basic-level entry-level administrative work, which used to be just a high school diploma or GED, now requires a bachelor’s degree.
The average federal student loan debt in Louisiana is $34,525, the 18th highest in the United States, the data shows. Between 2008 and 2019, Louisiana was second in the nation in higher education budget cuts, but led the nation in tuition increases.
Tuition fees have also increased due to easy access to federal loans, said Gary Wagner, Acadiana business economist at UL-Lafayette. Colleges can continue to raise prices and students will pay for an education even if they have to take out loans.
Average student debt, he noted, could be skewed by those attending higher education, leading to higher costs. The median amount of debt outstanding in Louisiana is closer to $24,000.
“To me, that doesn’t sound like a very large number, given that the average college graduate earns more than the average high school graduate,” Wagner said.
how we go out
The issue of debt cancellation may not be resolved until the end of August, when the moratorium will be lifted, sources said.
Cancellation isn’t the only way out, Wagner said. Earnings from future earnings often exceed much of the accumulated debt, but that would require a student to graduate to do so.
“Student loan debt forgiveness gives a significant cash transfer to a group of people who are more likely to be a wealthier person,” Wagner said. “The big risk of student debt isn’t for people who graduate…It’s what happens to people who start college and never finish.”
At UL, leaders support any help students may receive, Bowie said. Recent increases in state funding will allow them to expand aid programs and maintain tuition and fees. Last year, the university used $2.7 million from the CARES Act to forgive student debt.
Lewis thinks Biden will cancel student debt. On Tuesday, the Biden administration canceled student debt for 40,000 people through the Civil Service Loan Cancellation Program.
The benefits to the economy will offset the revenue losses for the federal government, he said.
“It’s about student debt — not people who decided to go and spend a weekend in Bermuda and use a credit card,” Lewis said, “Going to college doesn’t It’s not a desire. It’s a necessity.”
The Debt Collective, based in Washington DC, offers a different approach. In partnership with the Rolling Jubilee, it redeems student debt at pennies on the dollar and simply forgives it, spokesman Braxton Brewington said. The organization also supports a debt strike if repayments were to continue, he said.
Failure to repay student loans, he noted, can have serious and lasting consequences.
“Rather than acting like a predatory debt collector, going to their homes and harassing people, we erase debts,” Brewington said. “More than half of the people who had student loans didn’t pay a penny. They were in forbearance and default. The government does not need our money, but it does need our cooperation.
Canceling student debt is just the beginning of what’s needed moving forward, Brewington said. Universal or “free” college as in some European countries is the model America should follow.
“Reforming the student loan industry doesn’t make income payments easier, it doesn’t change the way we handle these loans,” Lewis said. “(Cancelling the debt) is not the ultimate solution.”
Forgiveness, however, may not even come.
“They [the government] don’t worry about us being in debt,” Duplechain said. “They care if they get any revenue out of it.”