Our team came together on the 20th June 2015 in an attempt to spend an entire day finding a politically balanced yet successful solution to America’s student debt crisis. To achieve this goal, we spent a good majority of our time discussing various issues relating to the crisis, and how to tackle each issue from a policy perspective at the State level. The issue of student loan debt is two fold, accounting for 1) prospective student debt, and 2) current student debt holders. In order to solve the issue fully, both parts of the issue must be addressed. We feel that this policy paper fully and completely addresses both issues, and provides clear policy objectives in the hopes of solving Ohio’s, and the nation’s student debt crisis.
Early financial literacy education is crucial for prospective post-secondary students to understand the scope of their future financial commitments. Many students in high school who have not been exposed to the financial realities of student loan debt are not equipped to make responsible financial decisions, such as: whether to attend a public or private institution, whether to attend an in-state or out-of-state school, whether to attend a two-year or four-year institution, and how to anticipate post-secondary costs outside of tuition and fees.
The state currently mandates some financial literacy education in high school under ORC 3313.603(C)(7). We call for this education to be expanded by mandating that:
- Financial literacy should be provided as a separate high school course.
- The requirements for financial literacy should specifically include post-secondary financial considerations, such as understanding student loans, tuition and fees, and the total costs of attendance.
- High school students should go through the process of drawing up a tentative financial plan for their post-secondary future.
- High schools should report on their students’ financial literacy compliance to the Ohio Department of Education, in order to ensure accountability.
In addition, post-secondary institutions should continue this financial literacy education. Every post-secondary institution should be mandated to incorporate financial literacy into their introductory curriculum, at the very least. This would allow for students to better understand and control their growing financial obligations.
A significant driver of post-secondary costs involves students not being able to complete their degree in the traditional 4 year timespan. The College Board reports that for Ohio, the average 4 year graduation rate is approximately 50%. While most Bachelor’s degrees are intended to be 4-year instructional degrees, an alarming number of students nationally are taking 5 or 6 years to graduate. That often means more and more costs taken on by those students in the form of additional loans to cover additional years of tuition, books, and room/board.
Far too often, the student doesn’t necessarily have control over these additional costs. Sometimes they are due to part-time or full-time work, and other times it is caused by switching majors or taking fewer classes than intended per semester. Other times, the university may cancel classes or change schedules that has a ripple effect in preventing students from following a roadmap to timely completion.
We recommend that post secondary institutions along with the University System of Ohio work together to develop an across the board financial incentive for “timely” completion. We suggest that this policy be developed to provide a 5% tuition rebate to students that finish a traditional 4-year degree with 8 full semesters of tuition. That being said, to incorporate our statements above on the roadblocks to completion, we are open, and suggest further discussion as to the specific timeframe required. As such, these requirements must be flexible to allow for students to pursue employment opportunities (for example, full- or part-time internships). Our policy stance is that a timely completion credit be established, we encourage thorough discussion on the specific timeframe with all of the affected stakeholders.
Additionally, many schools across the United States have adopted a “Finish in Four” promise. As opposed to a financial incentive, this is a commitment from the university to provide the advising and scheduling resources to ensure that a student can graduate after 8 full-time academic semesters, if wanted. If a student follows a course roadmap decided with their advisor during their first semester, the university awards a degree after 4 years or tuition reimbursement for any extra semesters. If the student deviates from the roadmap, there is no penalty; this is simply a way to hold universities accountable for students’ timely completion. We recommend that State Universities in Ohio consider this model as well for developing strategies to encourage their students to graduate on time, and with less debt.
A student’s post-graduation prospects in the job market figure heavily into that student’s ability to successfully manage their student loan debt. For this reason, universities and the state must invest in the employability of their students.
Currently, the Ohio Third Frontier Internship Program provides subsidies from the state to companies in order to offset their costs in creating new co-op or internship positions in certain advanced STEM fields. However, in today’s job market, non-STEM students are especially susceptible to student loan debt and are in great need of employability support.
We call for a public-private partnership to be developed with the intention of encouraging the creation of apprenticeships, co-ops, internships, and fellowships for students of all majors. These experiences should provide college credit and/or a stipend/salary as determined by the institution and employer.
We also call for the creation of a college-to-job pipeline in Ohio, as the logical extension of the program developed above. Working with member institutions, and the students already within the internship program, our hope is to see business and industry working with post-secondary institutions to find jobs for students within the internship program.
State Share of Cost of Attendance
In the past, state subsidies funded the majority of university budgets when compared to student tuition and fees. Over the past decade or more, these have flip-flopped; now, the vast majority of university budgets are paid for directly by students.
This year’s biennium budget is headed (most likely) in the right direction. The State Senate has proposed increasing SSI (State Share of Instruction) by 4% the first year and 4.5% the second. This trend, if supported by Conference, is positive.
The state legislature should continue to support caps for tuition and fees at 0% growth in order to prevent costs from being offloaded onto students. However, universities need to be able to keep up with inflation and rising costs, and also (preferably) to grow new world-class programs. Thus, the state must continue to invest into higher education with more SSI funds to offset the loss of potential tuition revenue.
Additionally, in order to incentivize universities to find cost savings and pass these savings on to students, the SSI funding formula (currently based on completion rates, enrollment, and other factors) should incorporate an Affordability Score. This Affordability Score should be based primarily on the total cost of attendance. The affordability score will be published, promoted, and will be a point of pride for student recruitment.
Need Based Aid
The State of Ohio provides need-based aid for post-secondary education through OCOG (Ohio College Opportunity Grants). The amount allocated for these grants has been lowered in recent years. In addition, new rules have made these funds inaccessible to students at branch campuses or community colleges, many of whom are of the highest financial need.
This year’s proposed biennium budget reverses OCOG’s funding trend and allocates a reasonable amount of new funds to increase OCOG. This trend should be continued, and the State of Ohio should invest more into the neediest Ohio students. In addition, OCOG availability should be restored for community colleges and branch campuses, and extended to Ohio Technical Centers and ABLE programs.
OCOG’s Pell-First policy, which does not keep into account the total cost of attendance (only tuition & fees), does not apply need-based aid fully to those who need it. With increased OCOG funding, in addition to availability at more campuses, the need calculation should be changed to total cost of attendance.
University Cost & Waste Reduction
Senate President Faber has proposed a 5% cost of attendance reduction “challenge” for all Ohio public universities. This proposal should be enhanced with accountability measures for universities to follow through.
All universities have waste. Executive compensation, administrative bloat, small or unsustainable academic programs, and athletic budgets should all be reviewed appropriately. Each university should be required to develop a plan for reducing students’ cost of attendance by 5% within a certain number of years, but should be given the ability to make local budgeting decisions without being micromanaged. They should, however, be discouraged from making cuts that negatively impact students’ educational experiences, such as cuts to instruction, faculty, and educational/cultural student organizations.
It is important to note that not all costs of education can be impacted by cutting costs at the university level. Universities should be encouraged to develop creative solutions for saving students money on ancillary costs, such as textbooks and supplies. Universities should also pass on the cost savings of online classes; many universities price online classes the same as traditional classes even though the overhead cost of an online class is lower.
For universities that are not able to meet the challenge goal of 5% cost reduction for students, they should be placed on an “Affordability Probation List” managed by the Ohio Board of Regents. This would provide PR ramifications similar to how the federal government has placed universities on a public “Under Investigation” Title IX list, and potentially other penalties as determined by the Board of Regents.
Current Student Loan Debt Holders
College loans used to be an investment in one’s future. The premise was that the short term investment in one’s education would turn into long-term prosperity, with a sustainable income that could pay off the cost of the education itself. Today, that principle is beginning to change, and the rate of change is becoming more and more dramatic. Unfortunately, while there is a vast array of potential solutions to help reduce the future costs of education, there are far fewer solutions to solve the present crisis.
This is of particular concern because the current student loan crisis, with total U.S. student debt surpassing $1.2 trillion, has tremendous implications on the short term health of the U.S. economy. Its implications on the economy, and the fact that of this $1.2 Trillion in debt, $1 Trillion (83.3%) is federal student loans, making this issue inherently political.
While the data on this issue is clear, and the problem is well defined, the politics of this issue could not be less clear. The importance of a college education is at an all-time high, but so is the cost. Each year, Ohio graduates nearly 44,000 students from its various public undergraduate programs, each with an average of nearly $29,000 in debt. This adds roughly $1.276 Billion to the student loan debt pool, just from Ohio alone. The economic value of these students, however, is something that the State of Ohio cannot afford to waste. Unfortunately, the impacts of crushing student debt are strangling this very lucrative source of economic activity among the millennial generation.
If no action is set to come from a Federal level with regard to student debt, Ohio is placed at the doorstep of a unique opportunity to capitalize on the investment it already makes in educating students, by keeping them in Ohio.
As a primary policy action, our group proposes a College Debt Tax Credit for all Ohio public undergraduate college or technical school graduates making less than $40,000 annually, permanently residing in Ohio, who are not, and have not been in default of their college loans and are currently making payments. All graduates who fall into this category would be eligible for a $1,000 credit, for 10 years.
The political realities of the nation, but more importantly Ohio, make this solution incredibly difficult to move forward. That being said, the reality of the situation dictates our action. The difficulty when trying to implement groundbreaking or game changing solutions to an existing issue is the large cost of any such program. Programs aimed to incentivize work for credit, on a scale of simply 44,000 applicants per year, over decades, have never been implanted before, and their overhead costs alone may far outweigh the cost of simply forgiving all of the present student loan debt. What’s more, repayment plans also have their drawbacks. Therefore, we call for this tax credit to be payed for by an increase in the general state sales tax, an increase of 0.5%.
This all said, Ohio Governor John Kasich has a history of suggesting sales tax increases. In fact he proposed such an increase as a method for providing a larger income tax cut for Ohio Families. Beginning to remove the burden on students at a state level is a way of proving that Ohio is serious about tackling student debt, and serious about keeping its talent in state.
Tax credits for student loan debt are not a new idea. They are however, a way of incentivizing college completion, and residency within a certain state (if structured as proposed) which has demonstrated benefits on local, and statewide economies. Something Ohio could directly benefit from.
As a final policy action, we call for Ohio to seek federal grants to develop a public-private partnerships to develop a pilot program called OhioCorps. The Corps will recruit graduates of the Ohio university system to engage in service projects in needy communities throughout the state. The Corps members shall receive a small stipend, and upon completion of the two year program, the state of Ohio will pay a proportion of their debt to be determined.
OhioCorps will be funded in part by the State, and in part by the private industries that need college graduates of the Ohio university system.