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Wednesday, June 11, 2014

Federal student loan repayment reform welcome news, but devil is in the details, NH experts say

In a state where college graduates and their families face some of the highest debt loads in the nation, any reform to make higher education more affordable and easier to pay back is welcome news.

But President Barack Obama’s plan to help college students to repay their loans does little to control rising college costs and may not benefit all students, New Hampshire experts say. ...

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In a state where college graduates and their families face some of the highest debt loads in the nation, any reform to make higher education more affordable and easier to pay back is welcome news.

But President Barack Obama’s plan to help college students to repay their loans does little to control rising college costs and may not benefit all students, New Hampshire experts say.

The president’s “pay as you earn” program would cap debt repayment at no more than 10 percent of a borrower’s income, but also could drastically increase the length of the loan and the amount of interest that graduates pay back over time.

“ ‘Pay as you earn’ would definitely be helpful when the student first goes into repayment, but the student pays much more interest over time,” said Tara Payne, vice president of college planning and community engagement at the New Hampshire Higher Education Assistance Foundation in Concord.

Payne said based on the average college debt for New Hampshire graduates, using the “pay as you earn” program to lower monthly payments would come at a price.

“The vast majority would pay more interest,” Payne said. “The devil’s in the details. Students need to really examine their own circumstances choosing a repayment plan. They need to be careful and thoughtful going into repayment. They’re making a decision in the short term that will affect the long term.”

Mark Rubinstein, vice president of student academic services at UNH, agreed that the plan could be beneficial or ultimately cost more, depending on the borrower’s circumstances.

“As an institution, we try to control costs at the front end and help students make informed decisions when borrowing,” Rubinstein said.

One important thing for students to keep in mind, Rubinstein said, is that the president’s plan only applies to federal and not private loans.

Students and their families hold about $864 billion in outstanding federal student loan debt and another $150 billion in private student loans, according to the Consumer Finance Protection Bureau.

The total amount of debt that graduates and their families have taken on in order to pay for college has exploded during the past decade.

In the past 10 years, college loan debt has skyrocketed from about $200 billion to about $1 trillion, according to figures from the Federal Reserve Bank of New York.

The $1 trillion in college loan debt is more than the total amount of debt that Americans have on their credit cards and more than every auto loan in the country added up.

In New Hampshire, those costs are passed on to graduates, who receive no state scholarships and face the highest average tuition rates in the country, at $14,576.

Students who graduate from New Hampshire colleges have an average debt load of $32,698, which is the second highest in the country, according to the Project on Student Debt.

And just 2.6 percent of the New Hampshire state budget goes to higher education, forcing families pay about 84 percent of college costs, the Student Impact Project says.

Last June, the UNH board of trustees froze in-state tuition for two years after regaining some aid through the state budget.

UNH President Mark Huddleston wants to extend the in-state tuition freeze for another two years with help from the Legislature, although fees and room and board costs continue to rise. For instance, the total cost for full-time UNH undergraduates to sign up for a core meal plan and double room rose $360 since the last school year.

Todd Leach, chancellor of the University System of New Hampshire, supported the federal expansion of the “pay as you earn” plan but didn’t address the cost of college in New Hampshire.

“This modification to the student loan program should lower the risk for more citizens to pursue a college education,” Leach said in a prepared statement. “We must provide students with high value for them to be able to pay back student debt and for them to fill high demand jobs.”

In the end, Payne said any college repayment program that offers more options and gets people thinking about student loan debt is beneficial, as long as borrowers understand the consequences.

“I think it sounds good, and for some who are truly low-income grads, it could be good,” she said.

Payne recommended visiting the Federal Student Aid website at studentloans.gov to try the “repayment estimator,” since it guides students in choosing a suitable repayment plan.

“I think this is a good thing to call attention to student loan debt, college costs and the lack of higher education affordability,” she said.

Tina Forbes can be reached at 594-6402 or tforbes@nashuatelegraph.com. Also, follow Forbes on Twitter (@Telegraph_TinaF).