As student debt mounts nationally, with the $1.4 trillion in U.S. student loans surpassing credit card debt, it's critical to ensure Hoosier parents and students have options for paying for college wisely. A little-known mechanism – tax-exempt Qualified Student Loan Bonds – provides Hoosiers a pathway for doing just that.
But as congressional leaders tackle tax reform this fall, that tool could be on the chopping block. It's among the types of municipal bonds at risk of losing tax-exempt status to broaden the tax base and make way for lower corporate and individual tax rates. That would take away an important vehicle for making college more affordable at a time when the cost of higher education is one of the most pressing concerns facing Indiana families. Indiana's congressional delegation must work to keep this important college-financing tool intact.
As the price tag of education beyond high school continues to rise, existing federal loan options, such as the Federal Direct Stafford Loan, often fall short of fully covering the cost of a degree. Middle-income families, in particular, need support to help fill the gap.
Indiana is among 21 states with nonprofit and state-based providers of student loans, many of whom use tax-exempt Qualified Student Loan Bonds to help families manage the cost of college in a way that is transparent, responsible and based on students' needs. Because of their tax-exempt status these bonds, in many cases, allow the nonprofit lenders that use them to offer lower interest rates, origination fees and monthly payments than many commercial lenders provide. That helps families save money and students avoid onerous debt loads they too often carry with them for years following graduation.
Indiana's nonprofit, state-based loan provider, INvestEd, offers Hoosier families a low-cost, fixed-interest-rate loan of 4.24?percent with no origination fees. To help create incentive for college completion, INvestEd borrowers who graduate qualify to have their loan principal reduced by 2 percent. INvestEd also offers a student loan refinancing program, extending the opportunity to save on college costs beyond current students to any Hoosier with outstanding student debt.
INvestEd has used tax-exempt Qualified Student Loan Bonds as market conditions warranted. It's important INvestEd have access to this tool in the future so it can continue ensuring low-cost loan programs for Hoosier families.
And loans are but one way that the nation's nonprofit and state-based loan providers help make college accessible. These organizations also offer families and students financial-aid literacy coaching – free of cost – as part of their mission. That empowers families with the knowledge needed to make wise decisions about paying for college.
In the past year, these organizations provided 2.5 million students and families coaching and direct support on financial-aid literacy; assisted 1 million students with college applications; and hosted more than 600,000 free programs for students and families on college planning and budgeting. INvestEd had nearly 400 presentations on college planning and financing in 2016 and worked directly with 12,000 Indiana students and families to help them navigate the college-planning process.
Making paying for college less daunting is especially critical, given today's economic landscape. Since the Great Recession, 2.9 million “good jobs,” which pay $53,000 or more annually full time and typically offer health insurance and retirement benefits, have been added to the economy, according to a 2015 report by Georgetown Center on Education and the Workforce. Of those jobs, 2.8 million have gone to college graduates. Getting an education beyond high school is integral to landing a good-paying, 21st century job, and a college degree offers a strong pathway to opportunity.
To give Hoosiers the opportunity for a good job and a good life, we have to ensure more people have access to higher education. Qualified Student Loan Bonds – and the nonprofit, state-based providers that utilize them – offer a proven way to fulfill that promise.
As they approach the imminent task of revamping the tax code, lawmakers must ensure these tools are protected.
Joe Wood is president and CEO of INvestEd, an Indiana nonprofit that provides financial-aid literacy, student loans and refinancing for Hoosier students and families.