College students can’t take too many more financial hits

THE OLYMPIANNovember 15, 2011 

Lawmakers will return to Olympia on Nov. 28, in hopes of coming to a speedy agreement on how to fill a $2 billion funding gap in the state’s two-year operating budget.

Among the cuts proposed by Gov. Chris Gregoire is another $166 million from higher education – the state’s college and university system. The budget reduction represents an additional 15 percent reduction to a category of state spending that has undergone multiple cuts during the last three years.

The 2011-13 state operating budget adopted by lawmakers in a May special session included reductions of $617 million from higher education. To offset that huge financial hit, lawmakers authorized college and university trustees to impose double-digit tuition increases – up to 16 percent at major universities. That’s on top of tuition increases of up to 14 percent the two previous years.

With the governor suggesting additional spending reductions in her all-cuts budget plan, we have to ask whether the state is living up to its obligation to fund higher education and whether middle class students are being priced out of a college education in this state.

We were struck by two recent reports. The first was a USA Today story noting that members of the college class of 2010 who took out student loans owed – on average $25,250 – upon graduation, a 5 percent increase from the previous year.

The report said roughly two-thirds of the class of 2010 borrowed for college. But when they graduated, they faced an economy in serious economic recession and a 9.1 percent unemployment rate for new college graduates. The only glimmer of hope for the college graduates was the fact that colleagues who had a high school degree were facing an unemployment rate twice that high.

The report came at a time when the College Board said average tuition nationally was going up 7.3 percent at public four-year colleges. The report drove home the point that Washington state is not alone in the challenge of college affordability at a time when states have significantly cut support for higher education.

A second report from the Federal Reserve said the total amount owed in student loan debt in this country is $1 trillion. That means the volume of outstanding student loans now exceeds credit card debt.

How’s that for a frightening thought?

Moody’s Analytics puts the national student loan debt at around $750 billion and notes that while consumers are paying down their credit card debt, student loan debts continue to escalate.

And with that mounting student loan debt comes a parallel increase in the number of students defaulting on their loans. Officials say that like the housing crisis, many student loans were approved with little to no research into whether the borrowers would be able to repay their loans.

Not surprisingly, defaults on student loans in recent years has increased from 7 percent to 8.8 percent.

President Barack Obama acknowledged the problem last month in a speech to students at the University of Colorado in Denver. The president said, “We were paying more on our student loans than we were paying on our mortgage each month. How do we make college more affordable, and how do we reduce your burden?”

Through executive order, Obama’s answer was to allow students to pay 10 percent of their discretionary income for 20 years and have the rest of their federal student loan debt forgiven. Secondly, the president’s plan allows an estimated 5.8 million people to consolidate their debts into a single loan with a reduction in their interest rate.

Obama’s “pay as you earn” option could benefit up to 1.6 million low-income borrowers and reduce their payments by as much as a couple of hundred dollars a month, White House officials say.

Those are positive steps.

And we drew some hope when House Ways and Means Committee chairman Ross Hunter, D-Medina, looking at the daunting task of rebalancing the state budget, said his priorities for the special session will be paying for K-12 education, maintaining a safety net for the vulnerable and poor while avoiding harm to the economy that gutting higher education would cause.

Let’s hope his legislative colleagues agree. Higher education – and students – can’t afford many more financial hits.

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