Short-term relief on the horizon for federal student loan borrowers as tuition costs continue to rise over the years

As the cost of higher education continues to rise, with more students relying on federal loans to pay for their degrees, short-term relief may be on the way for former students struggling to get out of debt, while questions remain regarding a long-term solution.

Adjusted for inflation, the average annual cost of attending a four-year, full-time college—including tuition, fees, room, and board—in the United States rose from $10,231 in 1980 to $28,775 in the 2019-20 school year, a roughly 180% increase, according to the National Center for Education Statistics.

“We’ve been telling everybody for decades, ‘You have to go to college.’ So the demand has gone wild, and many colleges aren’t functionally much bigger than they used to be, so every seat is more expensive,” said Dietrich Vollrath, professor and chair of the Department of Economics at the University of Houston.

Data from the Federal Reserve System shows that more than 45 million borrowers nationwide have contributed to approximately $1.75 trillion in accumulated student loan debt, with more than $1.6 trillion of these loans issued by the federal government. In Texas, 52% of college graduates in the 2019-2020 school year had student loan debt with an average debt of $26,273, according to the Institute for College Access & Success.

In the five postcodes in and around the Pearland and Friendswood area, data shows that more than 142,700 people aged 18 and over have university or higher experience, about 71.2% of the local population aged 18 and over. 18 and older, according to US Census Bureau data.

Locally, the cost of one-year tuition at Alvin Community College increased by approximately 13% between the 2012-13 and 2022-23 school years, while the average annual cost of tuition at the University of Houston-Clear Lake grew more than 36% in the same time frame, according to college data.

Hoping to provide relief, President Joe Biden announced on August 24 that he would issue an executive order that will allow nearly 43 million Americans to get up to $20,000 in forgiven federal student loans.

While the plan has been welcomed by borrowers, experts said they fear loan forgiveness could lead to further tuition inflation. Betsy Mayotte, president of the Institute of Student Loan Counselors, said while she supports the initiative, she believes it is not addressing the root cause of the problem.

“Everyone is talking about the student loan crisis, and it’s there, but it’s a symptom, not the problem,” Mayotte said. “The problem is the cost of higher education, and this plan does nothing to address that.”

Expensive tuition

Vollrath said inflation plays a role in raising the cost of a college education, but he also noted two additional factors that have led to steadily rising tuition costs.

According to Vollrath, wealthy economies such as the United States tend to experience faster rates of inflation for services such as education and health care compared to manufactured goods, because the cost of producing these goods decreases over time.

Vollrath said the second contributing factor to the tuition hike has been a decrease in financial support from state governments. Between 2008 and 2018, state spending on higher education in Texas fell from $9,256 per student to $7,107, a decline of 23.3%, according to the Center on Budget and Policy Priorities.

“We’re getting about half the money we thought we were getting 20 to 30 years ago, and you have to take that into account, so it usually ends up being offloaded to students,” Vollrath said.

During the same period, the average cost of tuition at public four-year colleges in Texas increased by $2,302, or 30.4%, according to CBPP data.

“If you reduce the cost of your public institutions, it would hypothetically force these private universities to reduce [their cost] just to be competitive,” Mayotte said.

However, Vollrath said he doesn’t think the blame should be directed solely at declining state contributions to higher education.

“I think there are definitely things you can talk about on the college side,” he said, speaking generally of public colleges. “Why are universities paying for things that seem to drive up tuition and don’t seem to contribute to the foundation of a student’s education?” »

Basics of the diet

As noted in an Aug. 24 White House press release, Biden’s three-part plan will provide up to $20,000 in debt forgiveness to Pell Grant recipients with loans held by the U.S. Department of Education. and up to $10,000 in debt forgiveness to non-Pell Grant recipients.

The Biden administration began accepting requests for loan relief on Oct. 17. However, the program was temporarily blocked by a federal appeals court on October 21 as it heard a motion from six states to permanently halt the program. Although this decision prevents debt cancellation, the White House encourages people to continue submitting applications.

Individuals will be eligible for this relief if their income is less than $125,000 or $250,000 for married couples. Current students with loans will also be eligible for debt relief; however, borrowers who are dependents will qualify based on their parents’ income.

Additionally, the White House announced that the pause on federal student loan payments would be extended one last time through December 31 and that borrowers should expect to resume payments in January. According to the release, an application for borrowers to apply for relief will be available before the pause on federal student loan repayments ends.

The Department of Education has estimated that about 43 million borrowers will be eligible for relief, including 27 million borrowers eligible to receive up to $20,000 in debt forgiveness.

“People who must [$10,000] or less or [$20,000] or less tend to be the ones who struggle the most,” Mayotte said. “The reason their balance is so low to start with is because of one of two things: either they’ve been paying forever, or…they have debt and no degree.”

The Department of Education is also proposing a new income-based repayment program under the plan, under which monthly payments for undergraduate loans will be capped at 5% of the borrower’s discretionary income, or approximately half the rate most borrowers are paying today.

The plan also aims to improve the Civil Service Loan Forgiveness Program by proposing a rule that borrowers who have served in the military; worked in a non-profit organization; or worked in the federal, state, tribal, or local government receive appropriate credit for loan forgiveness.

local point of view

Across Alvin Community College, the cost per credit hour this fall is $47 for district students and $143 for nonresident students. Those rates have been the same since at least the 2020-21 school year, which was the last time the college raised rates, ACC Vice President of Administrative Services Karl Stager said.

According to college data, ACC is less expensive than UHCL, where the preliminary cost per credit hour is $251 for 2022-23, the same as last year.

About 8% of ACC students take loans, and that’s an average of $5,550. At UHCL, 28% of students borrow, which is an average of $9,632, according to data from the two colleges.

Still, UHCL prides itself on its cost, officials said.

“UHCL is one of the most affordable four-year universities in Texas,” said Kara Hadley-Shakya, UHCL’s acting vice president for strategic enrollment management. “Our goal is to keep education affordable.”

Mark Denney, UHCL vice president for administration and finance, agreed.

“UHCL offers a focused route to completing your full bachelor’s degree in four years at a relatively low cost, where many community college students can transfer and still have to spend more than two additional years at UHCL, making the total cost much closer if not more than attending UHCL from the start,” Denney said.

ACC officials said the college has focused on cutting costs by ensuring students only take the courses they need to graduate to avoid indebtedness. These proactive methods are better long-term solutions than reactive debt relief, they said.

“For us at community colleges, I think our prices are so low that we don’t put students in a lot of debt,” Stager said.

Hadley-Shakya said the students appreciate the loan forgiveness.

“Anything that eases the burden of student debt is significant,” she said. “Student loan relief may not solve all the financial problems facing students today, but it could certainly be part of the solution. »

Saab Sahi contributed to this report.

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