Mounting student loan debt has made the struggle to finance a college education increasingly difficult for Ohio’s students, and students nationwide. In the United States, there are currently 40 million people with significant student loan debt–equalling a staggering $1.2 trillion. Student loan debt is now the second largest sector of debt in American households, surpassing debt totals for both credit cards and automobiles. In Ohio, the average student debt for a graduate in 2013 totaled more than $29,000–and the number is rising. The crisis in higher education is discouraging to those aspiring to attend college and burdensome to graduates who are attempting to establish the career and lifestyle they initially went to college to achieve.
In order to mitigate the problem, we have developed four policy solutions that address some of the root causes of increasing student loan debt in Ohio. Immense student loan debt is the result of several factors including, but not limited to, students being either uninformed or under-informed of the total cost of their education, university/college inefficiencies, rising tuition, and state disinvestment in higher education.
Policy Solution #1: Comprehensive Career Counseling (CCC)
A key aspect of dealing with the growing mass of student debt is considering how to aid future generations in making financially sound decisions that may prevent them from taking on more debt than required to get a quality education and/or achieve their desired career path. This policy solution would double the state’s investment in counseling services for students at public high schools, and require all middle and high school counselors to adhere to a new set of standards when counselling students on their options after high school graduation.
Policy Solution #2: Subsidize Statewide Tuition
Currently, the state of Ohio budget does not fully fund higher education. A .35% add-on sales tax would provide substantial funding to subsidize undergraduate tuition for all students who are accepted into an accredited Ohio public university or college. The tax revenue would create a sustainable pool from which tuition could be funded, making a college education more accessible to all Ohioans.
Policy Solution #3: Commitment Ohio
A significant cause of the debt crisis is state disinvestment in higher education. Our proposal for increasing state monetary aid involves investing in the long-term growth of Ohio and creating an incentive for educated citizens to live and work in Ohio. By subsidizing student loans with the purchase of a home, Ohio can provide this incentive–reduced student debt–and reap the benefits of an increased number of tax-paying homeowners remaining in the state as tax paying homeowners.
Within the Commitment Ohio policy solution, the state can create a program that completely forgives student loans if a graduate dedicates their career to the interests of the state of Ohio. This initiative would develop a hiring base from which the state could reap the direct benefits of a graduate’s labor in addition to the individual potentially becoming a tax-paying homeowner.
Policy Solution #4: Student Report on College and University Efficiency
Rising tuition and student fees are also a contributing factor in the student loan debt crisis. While increases in the cost of tuition and student fees are most likely made in the interest of students, some costs could be the result of institutional inefficiencies that do not benefit the student experience. Identifying these inefficiencies could highlight areas in which colleges and universities can feasibly cut costs or eliminate entirely, if they do not benefit students. Thus, requiring each of Ohio’s colleges and universities to survey students regarding the impact of different administrative offices, programs, etc. could reduce college costs.
The benefits of the above policy solutions (implemented individually or together) will outweigh the costs by tackling some of the root causes of the student loan debt crisis. While the average cost of tuition and amount of student loan debt will be reduced for Ohio’s students and graduates, ultimately, the State of Ohio will benefit from increased homeownership, tax revenue, and commitment to the state by college graduates.
POLICY SOLUTION REPORT
Student loan debt affects graduates in ways beyond owing large sums of money. It can very well determine what career a graduate chooses, regardless of the field in which they earned their degree. Many graduating seniors seek employers that offer high compensation in order to satisfy their student loan payments. But in exchange for taking a high-paying job right out of college, some graduates may be overlooking alternatives that would better serve their career path. Graduates are pressured to immediately enter the job market rather than participating in job training programs, investing, working for a non-profit, or pursuing other options that may delay their income. For some, choosing alternative options before entering the job market would actually benefit their career more in the long run, despite lower pay initially.
The effects of student loan debt do not end with the quantity (of compensation) over quality dynamic. Increasing student loan debt also influences how graduates choose to spend their money. Many recent graduates are forced to live at home with their parents and are unable to purchase or even rent their own homes due to student loan debt. Graduates’ inability to establish their own independence can perpetuate through generations, undermining the payoff expected from earning a college degree.
Furthermore, and even more concerning for the state of Ohio, the increasing demand amongst graduates for opportunities with higher pay is causing many graduates from Ohio’s colleges and universities to leave the state in search of better opportunities. The “brain drain” phenomenon does not only deprive Ohio employers of the state’s best and brightest, but serves as a loss to the welfare of the state–a loss of potential working, home-owning taxpayers.
In order to address these issues, a multitude of policy solutions need to be implemented to address the root causes of rising debt, which include, but are not limited to, students being under-informed of the total cost of their education, college and university inefficiencies, rising tuition, and state disinvestment in higher education. In order to tackle these causes, we suggest (1) increasing the breadth of high school counseling to include alternatives to college, (2) implementing a statewide sales tax increase on all current products that receive a sales tax by .05%, with all revenue directed towards reducing tuition for students, (3) rewarding graduates that choose to live and work within the state of Ohio with a reduction in their state loan payments, and (4) requiring all of Ohio’s colleges and universities to seek student input on institutional inefficiencies that contribute to educational costs, but fail to benefit the student experience. In addition to policy prescriptions, this paper explores why the benefits of these solutions will outweigh the costs for the State of Ohio.
Comprehensive Career Counseling
Students who leave college without completing their degrees have also been shown to significantly increase the total amount of debt owed by adults in the United States. There are many situations in which a student may be unable to finish their degree; however, steps can be taken in high school to prevent students from attending college and incurring debt when their desired career does not require a college degree or when alternative paths can be taken to assist students in achieving their goals. Taking a gap year(s) to work and save money for college, considering colleges based on their financial feasibility, attending community college, taking post-secondary courses while in high school, going straight to vocational school or licensure programs for specific jobs–are all options that high school students should be instructed to consider before attending college. But currently, many high school counseling programs focus only on college preparation with minimal advising toward trade school. Furthermore, college counseling (especially in public high schools) is usually limited and skewed towards serving the needs of the top-achieving students.
Comprehensive Career Counseling (CCC) would not only require high school counselors to inform students about opportunities regarding college and trade schools, but establish a new standard by which counselors must educate students. The new standard would ensure that students are given the best information through more individualized counselling based on their career or post-graduation plans. For example, a student that explicitly expresses their goal of becoming a paralegal would not be given a blanket recommendation to obtain a four-year degree in paralegal studies, but be informed about two-year certifications, internships, and other alternatives that could aid them in achieving their goal, while minimizing debt.
The costs of implementing Comprehensive Career Counseling would be minimal, but require high school counselors to remain abreast of a larger number of opportunities available to high school students and recent graduates. Training may be needed in order to educate counselors on how to first identify and then remain updated on opportunities in new areas. After the initial training, counselors would be able to integrate the new standards into their current advising style and schedules.
Subsidize Statewide Tuition
Currently, the total cost of tuition for all of Ohio’s public colleges and universities is approximately $16 billion. A .35% add-on sales tax would generate enough revenue to significantly reduce the cost of a college education for Ohio students. The revenue created by the add-on tax would be divided each year amongst all students who live in Ohio, complete the Federal Application for Federal Student Aid (FAFSA), and enroll in a four-year, accredited Ohio public university or college. The aid would be distributed to students in the form of a state grant, regardless of their income (the FAFSA would only serve as a mechanism to track students, enrollment, and aid distribution).
Increasing college affordability, and therefore, accessibility, will attract prospective students and families to Ohio for the state’s affordable, but “quality” colleges and universities. The higher the number of students enrolled in Ohio’s colleges and universities, the greater the appeal to employers to recruit and invest in Ohio. Over time, the significant difference in the cost of higher education for students in Ohio in comparison to other states will attract enough individuals to expand the tax base, increasing the amount of revenue coming to the state. Furthermore, college would be more accessible to groups who have traditionally been disadvantaged when attending and paying for college. Therefore, the benefits of subsidizing tuition statewide outweigh the day-to-day cost of a .35% add-on sales tax.
Commitment Ohio will be an initiative between the State of Ohio, private/public student loan lenders, and banks, to create an incentive for college graduates to live and work in Ohio. The State of Ohio will work with private banks to discount an individual’s student loan after he/she has taken out a mortgage on a home in Ohio. The mortgage company would give a discount or lower the student loan rate for those that buy a house using a mortgage from that same company. Every two years, the graduate’s rate would be reduced by a specified percentage until their student debt has been paid off.
Banks have an incentive to sell the mortgage and Ohio has the incentive of gaining homeowners and workers, with property taxes going to public k-12 schools. Commitment Ohio will provide many students the opportunity to reduce their student debt while increasing their equity in a home. They will be able to invest the money that would have gone to student loans to a home, a symbol of independence and stability that will last the graduates for many years to come.
Since the previous piece on mortgages is something most people probably wouldn’t be comfortable with, within the Commitment Ohio policy solution, the state would create a program that completely forgives student loans if a graduate dedicates their career to the interests of the state of Ohio. A graduate seeking employment would be able to view which industry areas are of critical importance to the state and apply for a position. This initiative would develop a hiring base from which the state could reap the direct benefits of a graduate’s labor in addition to the individual potentially becoming a tax-paying homeowner. The debt forgiveness plan would follow the same timetable as Commitment Ohio, but reap the ultimate benefit. Overall, Commitment Ohio will help college graduates decrease their debt, incentivize them to purchase a home, and ensure our best and brightest stay in Ohio.
Student Report on College and University Efficiency
Rising tuition and student fees are also a contributing factor in the student loan debt crisis. While increases in the cost of tuition and student fees are most likely made in the interest of students, some costs could be the result of institutional inefficiencies that do not benefit the student experience. Identifying these inefficiencies could highlight areas in which colleges and universities can feasibly cut costs or eliminate entirely, if they do not benefit students (ex. student advising, various, programs, centers, etc.). The boards that determine their institution’s budget, however, currently receive very limited input on what actually impacts the student experience from the student perspective. Thus, requiring each of Ohio’s colleges’ and universities’ student governments to survey students regarding the impact of different administrative offices, programs, etc. could reduce college costs.
The benefits of the above policy solutions (implemented individually or together) will outweigh the costs by tackling some of the root causes of the student loan debt crisis. Comprehensive Career Counseling, subsidizing tuition, Commitment Ohio, and student reports will reduce student loan debt for those struggling to achieve their careers and meet their payments. While the average cost of tuition and amount of student loan debt will be reduced for all of Ohio’s students and graduates, ultimately, the State of Ohio will benefit from increased homeownership, tax revenue, and general improvement in the welfare of the state.