As rising numbers of Americans move from rural communities to suburbs and cities, so too do their student loans. Cities have begun to take note: in order to encourage even more people to move—and to prevent a potential student loan crisis—many have started offering their own forms of loan repayment assistance for their citizens. This drive to assist borrowers and future students is a great goal, especially with the White House and Congress considering elimination or capping of the Public Service Loan Forgiveness program. But will loan repayment assistance be enough to help city residents?
Many major cities and states are already helping their residents pay back their student loans. Memphis offers $50 per month to city employees to help pay their loans, and the state of New York will cover their residents’ loans for up to two years after graduation. Washington, D.C. is looking to join this club, with Councilmember David Grosso (I-At Large) proposing a bill that would help residents pay back their student loans.
Although this is being called “student loan forgiveness,” the program more closely resembles a Loan Repayment Assistance Program (LRAP). It is important to make this distinction, as loan forgiveness means that the remainder of a borrower’s loans would eventually be forgiven, which this program does not do. Instead, Grosso’s proposed program would cover five years of loan payments for borrowers, beginning two years after the resident graduates, with eligibility contingent on borrowers earning less than $75,000 annually (or $95,000 for married borrowers) and being enrolled in one of the income-driven repayment plans.
For many, this would be a welcome relief from their current monthly payments. Although many schools, states, and employers offer LRAPs, these often come with certain stipulations, or are only available to people working in certain careers. The John R. Justice Student Loan Repayment Program, for example, is only available to prosecutors and public defenders. Programs like the one being proposed in D.C. would allow more people access to a Loan Repayment Assistance Program, and could allow many people working at low paying, public sector jobs to use their income toward other expenses.
But will Grosso’s plan be enough to help alleviate the average student debt amounts for borrowers? Unfortunately, this proposed rule would only help recipients for five years, which would likely not be enough to get those loans on track to full repayment. The average student loan amount for all Federal Direct Loans is roughly $31,000, while the average borrower using Grad PLUS Loans (for graduate or professional school) is nearly $51,000. Five years of payment assistance on an income-driven repayment plan, which only requires repaying ten to fifteen percent of a borrower’s discretionary income per month, would make a tiny dent in the overall required repayments. As a result, some residents may prefer to be on a ten-year repayment plan if they can afford it. To solve this, Grosso could offer a fixed amount that borrowers could use to pay off their loans, whether in a ten-year standard repayment plan or an income-driven repayment plan.
For D.C. residents in the public service sector, however, an income-driven repayment plan combined with Public Service Loan Forgiveness and Grasso’s proposed legislation could be extremely helpful. Five years of loan repayment assistance and the ability to earn forgiveness after making 120 monthly payments would allow many borrowers to start families, buy homes, and spend their money in ways that support the U.S. economy.
You can help by introducing ideas like Councilmember Grosso’s to your city council or state government—especially if you live in a rural community and want to stem the flow of talent into the city.
Equal Justice Works provides support to public interest attorneys, and helps law students learn more about all aspects of managing their student debt. We have a debt relief newsletter, free student debt webinars, an informative website, and a free student debt e-book, Take Control of Your Future.
Brandon Hanson is the Student Debt Specialist at Equal Justice Works, where he helps students, lawyers, and law school professionals manage their student debt through education, outreach, and policy analysis. Brandon is a graduate of the University of St. Thomas School of Law in Minneapolis and the University of Iowa, and has worked with political campaigns, non-profit organizations, and state government.