President Joe Biden announced in August that the federal government plans to forgive up to $20,000 of student debt for people who took out federal student loans. People who received Pell grants and earn less than $125,000 per year ($250,000 for married couples) can get up to $20,000 in debt forgiven, while non-Pell borrowers are eligible for up to $10,000 in relief. The president also extended the pause on federal student loan repayments through December.
Student debt affects more than 43 million Americans, including about 646,000 Louisianans who hold a collective $22.7 billion in federal student loans. The federal student debt portfolio has more than tripled over the past 15 years, rising from $516 billion in 2007 to more than $1.6 trillion in 2022.
While debt cancellation is the issue of the day, the root cause of this crisis continues to go unaddressed: More than a decade of deep state budget cuts to higher education. In this sense, Louisiana lawmakers have significantly contributed to the rising cost of college that made the debt forgiveness necessary.
Between 2008 and 2016, the Legislature slashed state investments to public college and universities by 38%, while forcing more costs onto students and families through higher tuition and fees. For many traditional students, the added costs were partially absorbed by the state’s generous TOPS program. But Louisiana’s need-based aid program, Go Grants, was left to languish. As a result, students increasingly turned to borrowing to pay for school – which has been shown to lead to declines in credit scores, home buying, and retirement savings.
The rising cost of a college education is also born quite differently depending on a person’s gender and race. Black students are more likely to take out student loans and face fewer and less promising job prospects upon graduation due to racial discrimination. Women and students of color also have higher hurdles to overcome to complete their degree, such as family responsibilities and needing to work while in school. This has created a higher debt burden for those with fewer resources to repay.
As the federal government supports former students who were priced out of college and went into debt to finance their education, Louisiana state lawmakers can protect future students from falling into similar debt traps by adequately and equitably investing in public higher education.
In Louisiana, student debt is concentrated among those who are least likely to be able to pay it back
Roughly 646,000 Louisianans have federal student loans totalling a whopping $22.7 billion for an average debt of $35,139 per person. About one-third of borrowers in Louisiana owe less than $10,000, and roughly 54% owe less than $20,000. However, even this sum is hard for many in Louisiana to repay with a state median household income of $51,073. Louisiana also has the second-highest student loan default rate in the nation at 20% suggesting people in Louisiana are having a hard time paying back their loans while meeting their basic needs.
Research has also shown that those who do not complete their degrees tend to have lower amounts of debt. However, they also earn lower wages due to not possessing a postsecondary credential. As a result, many borrowers are saddled with substantial student loan debt relative to their income. The Bayou State has one of the lowest overall postsecondary attainment rates in the nation at 48.1% with bachelor’s degree attainment even lower at 17%.
Race and gender disparities
Women and people of color are more likely to be burdened by student debt due to historic and current systemic factors, including racial and gender discrimination in state and federal policy. While state-level race and gender data is not readily available, national data highlight the disparities:
America’s staggering racial wealth divide means Black households have less to invest in higher education than their white neighbors. As a result, 63% of white graduates from public colleges and universities borrow to pay for their education, while 81% of Black graduates must borrow.
- These disparities have resulted in Black college graduates owing an average of $23,400 at the time of degree attainment, compared to just $16,000 for white college graduates.
- Black borrowers also have more challenges to overcome in repaying loans including a discriminatory labor market that impacts both hiring and earning. As a result, Black graduates default at a rate five times higher than that of white or Asian students in the first decade after graduation.
- Women are more likely than men to borrow, with two-thirds of all federal student debt held by women, despite the fact that women today earn 83 cents to every dollar earned by men.
Louisiana should recommit to making college affordable
Federal student debt cancellation should only be a first step toward making college more affordable.
Getting more people to earn college degrees is critical to Louisiana’s economic and workforce strategy, while also being invaluable to the people of our state. The Louisiana Board of Regents has a goal that by 2030, 60% of working-age adults in Louisiana will hold a postsecondary credential. But encouraging more Louisianans to further their education should not lead to more people struggling with the crushing burden of student loan debt. A combination of federal student debt cancellation and increased funding for postsecondary education – at the state and federal level – are vital for ensuring that everyone, but especially low-income students, have access to both the public and private benefits that come with a degree.
In the next legislative session and beyond, Louisiana lawmakers should:
- Ensure that the need-based GO Grant program is fully funded so that all eligible students receive the maximum award of $3,000; and
- Aggressively reinvest in direct aid to our public colleges and universities to support in bringing down the cost of tuition and mandatory student fees.
-Richard Davis Jr., State Policy Fellow