In recent years, state governments across the United States have systematically disinvested in public higher education. This choice has helped fuel the rapid escalation of tuition at public four-year universities and two-year colleges. In response, many young adults have turned to borrowing the money needed to pay for higher education. The volume of outstanding student loan debt in the United States more than quadrupled from 1999 to 2011.1
Students and families in North Carolina have not been immune to the “great cost shift.”2 Between 2008 and 2015, inflation-adjusted state spending per student in North Carolina fell by 23.4 percent, or $2,866.3 Over that same period, inflation-adjusted average tuition at the state’s public four-year colleges rose by $1,759, or 35.8 percent.4 Sixty-one percent of the graduates of North Carolina’s public four-year universities had student debt in 2012-2013, with the average debt per student equaling $23,440 dollars.5
High levels of student debt can have a negative impact on graduates, constraining their career choices and limiting their ability to start families, buy homes, or launch businesses.6 Those problems become even more pronounced during economic recessions, which tend to exact a higher toll from young workers than other segments of the population.
Encourage state-sponsored student loan refinancing authority, pass a “Student Borrower Bill of Rights”, and expand North Carolina’s existing Forgivable Education Loans for Service (FELS) program.
Rhode Island7 and Connecticut,8 have recently created state programs to provide eligivle state residents with a low-interest refinancing option for their outstanding student loan debt. Many young to middle age adults are saddles with student debt and locked in at a high fixed interest rate that currently cannot be refinanced like a home mortgage. Using the state's bonding authority, North Carolina could offer loans at reduced rates.
North Carolina has an existing student loan authority, the NC State Education Assistance Authority (NCSEAA), which administers programs for student financial assistance. NCSEAA could be a ready-made vehicle for such a refinancing program. The program possesses both the statutory authority to provide eligible state residents with a low-interest refinancing option for outstanding student loan debt and an origination and loan servicing platform to carry out a program.
The state of Connecticut also has passed a “Student Borrower Bill of Rights” to set the ground rules that ensure lenders treat students fairly and that students fully understand all of the costs associated with a given loan. North Carolina can use Connecticut as a model and should establish an Office of the Student Loan Ombudsman to regulate student loans, assist borrowers with the student loan process, handle complaints involving borrowers and loan servicers, and tabulate and analyze relevant data.9
North Carolina should also expand its existing Forgivable Education Loans for Service (FELS) program. North Carolina should consider increasing loan limits for FELS, expanding the eligible occupations (e.g., science and technology fields), and including out-of-state students who commit to serve in North Carolina.
1 Quinterno, John. (2012). The Great Cost Shift: How Higher Education Cuts Undermine the Future Middle Class. Demos.
3 Mitchell, Michael and Michael Leachman. (2015). Years of Cuts Threaten to Put College out of Reach for More Students. Center on Budget and Policy Priorities.
5 Institute for College Access and Success. “College Insight Database.”
6 Think NC First. (2015). “The long-term effects of crippling student loan debt.”
7 Student Loan Refinancing. Rhode Island Student Loan Authority.
8 Office of Connecticut Gov. Dan Malloy, Press Release. (September 4, 2015). "Gov. Malloy Signs Legislation to Help Ease College Debt, Implement a Student Loan Bill of Rights."
9 For more information see State of Connecticut Public Act No. 15-162 (2015).