State weighs enhancing partial student loan forgiveness programs
ALBANY — Gov. Kathy Hochul and the State Legislature are pursuing ways to address high student loan debt, which has squeezed household budgets, forced students to drop out and make chosen careers in essential public service jobs unaffordable.
The state’s partial loan forgiveness programs are narrow and apply only to a few careers aimed at lower-income New Yorkers who are employed in specific public service careers in underserved communities.
Those programs are available to experienced attorneys who become prosecutors or lawyers for indigent clients; licensed social workers in a “critical human services area”; physicians in rural or inner-city communities; young farmers who agree to operate a farm full-time in New York state for five years, and graduates under the “Get on Your Feet” program who live in the state, earn less than $50,000 annually and already participate in the federal Pay As You Earn or Income Based Repayment programs.
They also are available for nursing faculty and adjunct clinical faculty who teach nursing, child welfare workers in state agencies, and teachers working in high-needs school districts or in subject with teacher shortages.
A 2021 study shows 59% of New Yorkers who graduated from college had student loan debt that averaged $37,600, according to the Rockefeller Institute of Government. On Long Island, the average student debt was $35,100 in 2018. Statewide, 2.4 million New Yorkers had student loan debt in 2020, with debt estimated at $90.3 billion, according to the study.
The state’s eight major student loan forgiveness programs this year are providing grants to 2,141 graduates at a cost of $6.2 million, as part of the current $212 billion state budget. The federal government also has a loan forgiveness program for Direct Student Loans that can be used by income-eligible graduates working in specific government and nonprofit agency jobs after making monthly payments for 10 years.
But those programs serve few graduates and the funding is small relative to the debt many graduates have. For example, the most recent state report shows qualified nurses received $7,926 on average in one year, with a maximum of $40,000, and physicians received an average of $10,000, with no maximum listed. The most used program, the Get On Your Feet Loan Forgiveness Program, serves 1,098 graduates who received an average of $910.
“Some of the professions graduate students with massive loans,” said State Sen. Toby Ann Stavisky (D-Queens), the Senate’s Higher Education Committee chairwoman. “It’s as if they are mortgaging their careers and they spend a lot of time paying off their student loans.”
In the state budget now being negotiated, the Senate and Assembly have tentatively agreed in their separate budget proposals to Hochul’s proposed tax exemption that would end a frustrating obstacle in student loan forgiveness programs.
Currently, New Yorkers find that their forgiveness benefit is treated as part of their adjusted gross income “resulting in increased tax liability and ultimately exchanging one debt problem for another,” according to the state Division of Budget. Hochul’s proposal would exempt the student loan forgiveness benefit from being counted as income and could expand use of the loan forgiveness programs.
The Senate also supports a related Hochul proposal that would allow the state to share education and employment records to speed the process of relieving student loan debt for state employees qualified for the state programs.
Counting the grant as taxable income "obviously undermines the benefit itself,” said Blair Horner, executive director of the New York Public Interest Research Group that lobbied for more student aid and loan forgiveness. “The governor’s proposal makes sense.”
The Commission on Independent Colleges and Universities also supports the tentative budget agreement.
“These programs are important for students working in critical fields like social work and nursing, among others,” said Lola W. Brabham, CICU’s president. She called on governments to provide more student aid to reduce borrowing.
Hochul also proposes a new student loan repayment program for nurses who agree to work in underserved areas for three straight years. The Assembly supports the proposal and wants to expand the types of nurses and locations that would be eligible to benefit from Hochul’s Nurses Across New York program.
While this kind of three-way support bodes well at this point in the budget process, final agreements won’t be sealed until the whole budget is agreed upon. The deadline was Friday.
In addition, there are more than a dozen active bills that would expand student loan forgiveness to more New Yorkers. The bills could see votes after the budget is adopted and before the legislative session is scheduled to end June 2.
The active proposals include competitive grants of up to $5,000 a year for 10 years for graduates of the State University of New York or the City University of New York who work in state or local government. Others are aimed at engineering graduates who remain in the state, employees who work for small businesses; agriculture instructors; dental school faculty; mental health workers; alcohol and drug counselors; lawyers for local governments; child care providers, and senior citizens.
The bills emphasize the benefit is to provide the skilled workforce needed for the economy to grow and to keep educated New Yorkers from joining an exodus to less-expensive states.
“The significant debt people have when they graduate hurts society,” said NYPIRG’s Horner. “It limits a person’s ability to purchase a home, the kinds of jobs they can get, and it suppresses the reason for going to college.”