Minnesota lawmakers are looking to provide assistance to student loan borrowers who are at risk of defaulting.
The bills introduced at the Legislature this month would create a student loan debt counseling program. If the measures pass, the state will select a nonprofit to provide financial information and help Minnesota borrowers who are 30 to 60 days late on paying back student loans.
“We are all aware of the high cost of student debt and how that impacts students for much of their adult life after school,” said Sen. Carla Nelson, R-Rochester, who’s an author of the Senate bill. “It impacts buying a house. It impacts their job prospects sometimes, so it is very essential that we address this.”
Minnesota ranked fifth highest in the nation for average debt procured by college students in 2013, according to the Project on Student Debt. Graduates of four-year state institutions in 2013 averaged $30,894 in loan debt, the project’s data said.
Sen. Greg Clausen, DFL-Apple Valley, who introduced the bill earlier this month, said the measure would appropriate $600,000 in both 2016 and 2017 to help about 2,400 people each year.
A debt counseling organization would be selected to work with students to understand and manage repayment options, as well as develop a budget based on individual financial situations.
At the University of Minnesota-Twin Cities campus, 3.7 percent of borrowers who began repaying their loans in 2011 defaulted within a three-year time span, according to the state’s Office of Higher Education.
In total, 12 percent of borrowers in Minnesota entered default status over the same time period. Students who attend two-year institutions are at a greater risk of defaulting. In the three-year period starting in 2011, 17.8 percent of borrowers at public community or technical colleges defaulted on their loans, according to state data.
“Knowing what you owe and then understanding what all your repayment options are can be really confusing,” said Cate Rysavy, senior director of financial counseling at Lutheran Social Service of Minnesota.
Rysavy said the nonprofit she works for has nine locations throughout Minnesota and has provided student financial counseling for years.
People from low-income families, first-generation college students and students of color are more likely to attend two-year institutions than four-year programs, she said.
If selected as the organization to run the program, Rysavy said the nonprofit would target students from two-year colleges.
Clausen said Lutheran Social Service of Minnesota meets all the qualifications to run the program and said he thinks it’ll apply if the bill passes.
Tricia Grimes, a former policy and research analyst for OHE and a current volunteer with the nonprofit, said going into delinquency on a loan could drop a person’s credit score by 100 points.
“People are checking credit, and it can have a devastating impact for many areas of the student borrower’s life,” Rysavy said. “Really trying to prevent default is one of the ways that this bill could benefit individuals and the Minnesota economy as a whole.”
Rep. Marion O’Neill, R-Maple Lake, who co-authored the House bill, said she would like to see a credit check before debt consultation and two credit reports after counseling to determine the program’s effectiveness.
Nelson, a co-author of the Senate bill, said bipartisan support of the legislation is important.
“There’s nothing partisan about debt and the damaging effects and limitations it can put on our students,” she said.
