Student loan debt counseling program would be made permanent, receive funding

Legislation to make permanent a pilot project to help students manage loan debt will be considered for possible inclusion in the Senate’s Higher Education Omnibus Bill to be proposed later this month.

The bill establishes a permanent program to be managed by the Office of Higher Education (OHE) to provide a grant to one non-profit organization offering student loan debt counseling. In 2015, $150,000 was appropriated to OHE for a temporary student loan debt counseling pilot program. The pilot program grant was awarded to Lutheran Social Services (LSS) of Minnesota.

In the first year of the program, LSS reported they served 981 borrowers from 60 counties across Minnesota. As part of the program, 99.4% of the borrowers stayed current on their loans. Fifty % of the delinquent borrowers brought their loans into good standing and 97% developed a monthly budget plan. Also, 119 Minnesota higher education institutions were represented as part of the program.

Minnesota has the fifth largest average student loan debt in the country, with more than 14,000 student defaulting on their federal student loans in 2013. Borrowers who become delinquent on their payments can find their credit scores drop by 100 points or more. Student loan debt also disproportionately affects students of color, low income students, and first generation college students. Between 2000 and 2004, half of black college graduates reported graduating with a student debt of more than $25,000, which is 16% higher in comparison to white graduates over the same period. Eighty % say their payments are more affordable after implementing changes with counseling

This bill sets a goal that the counseling program provide at least two counseling sessions to 75% of borrowers receiving counseling, requires a grant recipient to submit a report to OHE every two years, and requires the Commissioner of Higher Education to submit a report on the program to the Higher Education Committees of the Legislature every two years. (SF871)

 

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