Governors will continue to provide borrowers in their states with resources and guardrails that promote successful repayment and leverage student debt policy interventions to bolster their state workforce.
For the better part of a year, headlines and policy debates about student debt have largely focused on when payments will resume and whether borrowers will have any of their balances forgiven. While borrowers wait for answers from the federal government, Governors are investing state resources to deliver financial and technical support to borrowers who need the most help.
State initiatives that address student debt have taken several forms. Programs offering financial assistance to borrowers have been made available through tax credits, refinancing regimes, and direct repayment assistance for borrowers who meet certain eligibility criteria. Several states have implemented programs to help borrowers navigate an overly complex repayment system and put them on a path to successful repayment. And while the primary impetus for these programs is to support student borrowers, Governors of both parties have enacted programs designed to capitalize on existing federal resources and strengthen their state’s economy.
In October 2021, the U.S. Department of Education (ED) announced temporary flexibility that will allow eligible borrowers to be retroactively awarded credit for debt relief under the Public Service Loan Forgiveness (PSLF) program. To ensure that eligible borrowers capitalize on this temporary rule change, Governors can execute strategies laid out in ED’s PSLF Toolkit for State Policymakers.
In Maryland, Governor Larry Hogan has executed multiple student debt policy interventions to provide relief to Maryland residents and address workforce shortages in state agencies. In June 2018, Governor Hogan issued an executive order that established the SmartWork Student Loan Repayment Plan – a program that offers loan forgiveness to borrowers working in select state government roles that have been hard to fill.
More recently, in January 2022, Gov. Hogan announced that more than 40,000 borrowers have benefited from Maryland’s Student Loan Debt Relief Tax Credit Program – which gives priority to borrowers with high debt-to-income ratios – since its launch in 2017.
“Programs such as this allow for greater opportunities for our students and expanded options to assist with student loan debt, especially during this time when people are being squeezed by higher costs.”Governor Larry Hogan
In the run-up to her 2022 State of the State address, New York Governor Kathy Hochul proposed additional investments to support the 2.4 million New Yorkers who collectively hold more than $90 billion in student debt. New York is already home to a program called “Get on Your Feet,” which provides 24 months of repayment assistance for New Yorkers who graduated from an in-state college, work in New York, and make no more than $50,000. Borrowers must also be enrolled in an Income Driven Repayment (IDR) plan to be eligible – a requirement ensuring qualifying borrowers are on a path to Public Service Loan Forgiveness and that they make monthly payments equal to 10 percent of their discretionary income.
Both New York and Maryland are among the more than dozen states that have enacted a so-called “Borrowers Bill of Rights” (BBOR) law since Connecticut became the first to do so in 2015. Almost every BBOR establishes an Office of Student Loan Ombudsman to serve as the point person for the state’s student debt portfolio and carry out the consumer protection provisions in the statute – efforts that proved to be worthwhile early in the pandemic when several Governors secured relief for borrowers whose debt is not covered by the federal payment pause. Most BBORs also mandate that borrowers be evaluated for IDR before they default on their loan. This undertaking – which is not mandated at the federal level – can help ensure borrowers in financial distress take advantage of IDR’s generous terms that allow for monthly payments as low as $0 for borrowers with very low or no income, and in turn protect them from unnecessary harm to their credit score.
In addition to broad debt cancelation, the U.S. Department of Education is currently considering how student loan terms could be made more generous and whether the pause on repayment that has been in effect since the onset of the pandemic will end on August 31 as currently scheduled. All three major policy changes would significantly impact state programs. However, regardless of the outcome of policy debates in Washington, Governors will continue to provide borrowers in their states with resources and guardrails that promote successful repayment and leverage student debt policy interventions to bolster their state workforce.