Guest MINDSETTER™ Escobar: A Solution to RI’s Student Loan Debt Crisis
Wednesday, June 05, 2019
A few weeks ago thousands of people across the country, including myself, responded to Burger King via Twitter asking them to help pay their student loans after they tweeted “got student loans? What’s your $cashtag”. My tweet went semi-viral and some kind strangers of the internet actually sent me money to buy Burger King’s original chicken sandwich, my favorite meal at their establishment.
This is our economy in the era of the student loan debt crisis.
The student loan debt crisis is a multi-generational robbery where working-class Americans are not seeing economic benefits that were attainable to those growing up behind them. Millennials, Generation Z and potentially future generations have and will face almost unsurmountable debt before even reaching their first career job. High student loan debt forces young people to delay starting a family, purchasing a home, saving for retirement and even pass up on business ideas because of the lack of financial security they have. But, it’s not just young people that are dealing with this crisis. Americans age 60 and older owe more than $86 billion in student loans. Forty percent of them 65 and older are in default, according to the Consumer Financial Protection Bureau (CFPB). At a time where we are continuously brainstorming ways to spur our economy, it would be wise to invest in aiding those who are burdened by student loans in our state.
GET THE LATEST BREAKING NEWS HERE -- SIGN UP FOR GOLOCAL FREE DAILY EBLASTIn Rhode Island, we rank in the top five highest average student loan debt with an individual average debt of more than $37,000. According to an Experian study released in December of 2018, Rhode Island shoulders a burden of $4.5 billion in student loan debt, a figure that has more than doubled since 2008! That $4.5 billion is almost half of the $9.9 billion dollar budget proposed by Governor Gina Raimondo in January of 2019. Nationwide, student loan debt has reached to $1.5 trillion, a figure that has also doubled in the last 10 years. In context, the $1.5 trillion student loan debt Americans face is almost 1/3 of the proposed federal budget by President Donald Trump. Federal programs created to provide relief to those burdened by student loan debt simply don’t work. According to the Government Accountability Office, a program intended to forgive public servants from their student loan debt after working in public service for 10 years has seen a rejection rate of 99% because of “major administrative failings had left both the program’s administrator and borrowers in a state of confusion about the program’s rules.”
But wait, there’s more.
A recent audit by the Department of Education stated the Department “failed to track many mistakes by student loan servicers, the contractors hired to send out monthly bills, keep track of what borrowers owe and help them navigate repayment options. And when serious problems were discovered, the department rarely invoked its contractual right to dock servicers’ pay.” In other terms, companies like Navient are taking advantage of borrowers by not notifying them of their full options to repay their loans, potentially costing borrowers thousands, if not tens of thousands of dollars. In most cases, our government is looking the other way instead of holding companies like Navient accountable. Thankfully, Treasurer Seth Magaziner and Attorney General Peter Neronha are looking to tackle this problem locally by establishing the Student Loan Bill of Rights. The Student Loan Bill of Rights would require student loan servicers to set standards for student loan servicing, which would both prohibit the predatory behavior of these servicers as well as provide best practices for borrowers—effectively protecting them as any other consumers who would be protected for purchasing other consumer financial products, such as mortgages. Passage of the Student Loan Bill of Rights during this legislative session would also give our state the ability to examine, review and fine servicers who fail to comply, and allow for legal remedies for borrowers that were previously non-existent. And all these things can be accomplished with zero impact on the state budget. The General Assembly passing the Student Loan Bill of Rights this year would send a strong message to borrowers that our elected leaders have your back.
Kudos is also in order for Governor Gina Raimondo and the General Assembly for taking significant steps over the years to help those with student loan debt. But, more can and must be done. For example, the WaveMaker program that provides tax credits to Rhode Islanders with student loan debt who live and work in the state needs more investment and expansion. Currently, the program is intended for a small segment of STEM workers. The program could further serve our state by expanding the qualifications to fields such as small business owners, educators, union workers, and to professions that do not pay as high as jobs in the STEM field. Our government also took a small step addressing the biggest culprit of student loan debt, the whopping cost of tuition, with the RI Promise scholarship, where young Rhode Islanders can get their tuition covered at CCRI for two years. Governor Raimondo in the FY19 budget proposed expanding the scholarship to RIC and adult learners in CCRI. Not only should the General Assembly seriously consider this investment but they should also consider expanding this to URI in the future.
The $4.5 billion Rhode Islanders face in student loan debt should be invested here in our state. Those dollars should go toward home ownership, innovative businesses, shopping local and into our tax revenue instead of into the black hole of student loan providers. Rhode Island can be a leader in tackling one of the biggest economic issues that impacts our generation. Our elected leaders have shown some action, but we need them to dig in and dedicate themselves to solving this issue- not letting this crisis fall to the backburner. As this legislative session nears its end, we will soon find out how our elected leaders will respond.
Travis Escobar is the co-founder and board chair of Millennial Rhode Island
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