Bill could benefit Missourians with college debt

Editor's Note: The article below was corrected to say $23 billion of student debt in Missouri instead of $23 million.

A bill introduced last week in the U.S. Senate could benefit more than half the Missourians trying to pay off federal student loans, according to figures released Tuesday by the White House.

About 909,000 Missourians owe more than $23 billion in student loans, the report by the Domestic Policy Council and the Council of Economic Advisers states.

Of those, the report estimates 523,000 could benefit from proposed legislation that would allow them to refinance their student loans, and 110,264 could benefit from expansion of a program capping payments at 10 percent of a borrower's monthly income.

Locally, about 64 percent of undergraduates at Southeast Missouri State University take out student loans, university news bureau director Ann Hayes said Tuesday. The university's undergraduate enrollment last fall was 11,917, she said.

The average loan indebtedness for a SEMO student is $24,204 over four years, Hayes said.

She said a four-year undergraduate degree at SEMO costs about $58,700, which includes 30 credit hours a year for four years, textbook rental, suite-style housing and a 15-meal weekly board plan. The cost drops to about $29,130 for students who do not live on campus, Hayes said.

"Student loan debt outstrips credit-card debt," Cecilia Munoz, Domestic Policy Council director, said in a telephone news conference Tuesday.

Over the long term, students' investments will pay off, Munoz said, citing federal statistics that show people with a four-year college degree earn an average of $28,300 a year more than those with only a high-school diploma.

In the short term, however, some graduates are drowning in debt, she said.

"College ultimately is absolutely worth it, but we all have a role to play in making it more affordable," she said.

The White House is touting a set of initiatives designed to help reduce student debt, which has quadrupled in the past 11 years, from $250 billion in 2003 to $1.1 trillion in 2014, according to the report released Tuesday.

The report attributed more than half the increase in student-loan debt since 1995 to increasing enrollment.

More students also are borrowing money to pay for school, partly because more students from low-income families have enrolled in college in recent years, the report stated.

The initiatives designed to reduce student debt include:

• Expansion of a "pay-as-you-earn" policy that allows people to cap student-loan payments at 10 percent of their monthly income.
• Renegotiation of contracts with private companies servicing student loans.
• Specific efforts to disseminate more information to borrowers about their options for financing an education.
• A Senate bill introduced last week by Sen. Elizabeth Warren, D-Mass., and co-sponsored by Missouri Senator Claire McCaskill that would allow students to refinance loans at lower interest rates.

"These actions extend a critical lifeline to those struggling to manage their college debts," Munoz said Tuesday.

While Munoz emphasized the benefits of the initiatives for students and recent graduates, she offered little information about what they would cost, saying that figure is difficult to predict without knowing how many students would cap their payments or refinance their loans.

"We can't completely estimate the cost in advance," she said. " ... Ultimately, we will know when people enroll."

Also unclear was exactly how the changes would be funded.

Munoz brushed aside reporters' questions about specifics but said the White House submitted a budget proposal to Congress that would address student-loan reform "in a budget-neutral manner."

Over the long term, reducing college debt will have a positive effect on the economy, Munoz said, noting outstanding loans have driven some graduates to delay major purchases, such as houses.

"At the end of the day, this is an important investment in our economic future," she said.

epriddy@semissourian.com

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