As state leaders work to finalize budget, Ed Trust–NY report highlights policies that would improve equity and economic opportunity
Drawing on new data calculations showing that New York communities with average income under $50,000 owe a cumulative $29.5 billion in student loan debt, The Education Trust–New York today released Drowning in Debt, which identifies several state budget proposals that can help make college more affordable and protect borrowers from abusive lending practices.
“Against the urgent backdrop of the daunting and growing debt burden on lower-income families, New York should take advantage of the current state budget process to improve college access, affordability and success,” said Ian Rosenblum, Executive Director of The Education Trust–New York. “Proposals like the Assembly’s innovative Martin Luther King Jr. Scholarship Program, the student loan servicing bill included in the Executive Budget, and a range of proposed bipartisan investments would support programs that help students complete a degree and safeguard their rights as borrowers.”
Drowning in Debt reports that between 2016 and 2017 the amount of student loan debt New Yorkers collectively owe increased from more than $86 billion to over $90 billion, according to new data tabulations. The problem was particularly acute in communities with average household income under $50,000, where the total inflation-adjusted debt burden has increased by 44 percent in just six years and with average delinquency rates that far exceed that of wealthier communities.
The report identifies several opportunities in the state budget to address this issue:
- Make college more affordable for lower-income families by providing additional financial assistance for costs such as books, housing, food, and transportation. The Assembly 1-house budget proposes the establishment of a new Martin Luther King, Jr. Scholarship Program to address this unmet need. The Executive Budget and Assembly 1-house budget also include the DREAM Act, which would enable all students—regardless of immigration status—to participate in TAP and all other scholarship and loan programs.
- Protect consumers from student loan abuses. The Executive Budget would establish a Student Loan Ombudsman at the Department of Financial Services (DFS) and enact legislation to protect borrowers from industry abuses in the student loan servicing industry.
- Help students complete college and successfully enter the workforce. The delinquency gap between lower- and higher-income communities in part reflects the higher default rates faced by students who left college without completing a degree—leaving them with significant debt without the ability to earn a family-sustaining wage. Programs that address food insecurity and help low-income and other first-generation college students’ complete college, including the Higher Education Opportunity Program, can both reduce debt and lead to a pathway to economic and workforce opportunity that makes financial security possible.
New York Fed Consumer Credit Panel / Equifax; Internal Revenue Service. Community data is grouped by ZIP code and household income is calculated based on 2015 Adjusted Gross Income per tax return.