WHAT CAN BE DONE AS STUDENT DEBT EXPLODES?

While unsustainable consumer debt has helped bring the American economy to its knees, little attention has been given to the growing amount owed by college students.  A June statistics released by the Federal Reserve Bank has underlined the amount of student debt.  The total amount of student loans nationally- $830 Billion – now exceeds that of credit cards - $827 Billion.  (See the Wall Street Journal Blog http://blogs.wsj.com/economics/2010/08/09/student-loan-debt-surpasses-credit-cards )

This generation of college students enters the workforce with a debt burden that will take years to repay.  And unlike credit card debt, student loans typically are not eliminated through bankruptcy. 

The long term consequences for college graduates (and those that do not finish college) are significant: less disposable income after starting work, more stress and pressure due to large debts and more difficulty in making large purchases such as homes.  Reducing student debt would have a beneficial effect on the housing market as young educated couples would be better credit risks for new homes.

What, however, can be done?  Keeping public colleges open and affordable is a key step.  States need to pay attention to their public college systems which provide excellent education at a reasonable cost to students.  In this light, the recent reductions to public colleges and universities by State Legislatures and Governors is troubling, compounding financial pressure on students. To reserve these trends, students need to become politically active in defending their interests: a chance for a college education at an affordable price.  

THE PATH TO ECONOMIC RENEWAL

STCC Technology Park - home of the STCC Business Incubator

Springfield, Massachusetts is a post-industrial city that has seen its fortunes slip over the past two decades.  Once a hub of metal manufacturing, the City is one of the poorest in the Northeast.  A recent study by the Federal Reserve Bank of Boston accessible at http://www.bos.frb.org/about/ar/ar2009/lessons-from-resurgent-cities.pdf compares the success of so-called resurgent cities with those still struggling economically.

STCC has for over twelve years has run a business incubator with the goal of nurturing start-ups that, when mature, will boost the local economy.  In an attempt to attract high-tech companies, the college is partnering with the University of Massachusetts at Amherst, the flagship public research institution in the State.  A description of that partnership that includes a UMass spinoff locating in the STCC incubator can be found in an article recently published by Business West at:

http://www.businesswest.com/details.asp?id=2527

Both STCC and UMass/Amherst are convinced that this partnership will help grow Springfield’s economy and thereby move it into the category of a resurgent city.   

HELPING STUDENTS ACCESS FINANCIAL AID

Totaling $40 Billion a year, federal student aid led by Pell grants is by far the largest source of financial assistance to US college students.  State support which varies by state and usually is tied to federal definition of need is also a major contributor to a student’s ability to pay for college.  However, the federal process that requires the completion of the FAFSA – the Free Application for Federal Student Aid – is often intimidating.  In fact, surveys have shown that significant numbers of eligible college students, particularly at the nation’s community colleges, do not receive financial assistance because of the complicated forms and need for documentation. 

                            Rick Mortensen, STCC student, and Diana Rosado, financial aid staff

In an effort to provide additional information, a number of colleges have adopted a series of short videos produced by Financial Aid TV.  To view these videos at the STCC website go to: http://stcc.financialaidtv.com/ . 

Other efforts to reach students include holding workshops on financial aid availability and processes, improving communication via electronic media and helping students learn about aid and scholarships through their academic advisors.  These initiatives are yield results at Springfield Technical Community College as the fraction of students receiving federal and state aid has jumped from 50% in the fall, 2008 semester to 59% in the spring 2010 term.

(President Barack Obama greets the crowd at Macomb Community College in Warren, Mich., Tuesday, July 14, 2009. Official White House Photo by Lawrence Jackson)

OBAMA and COMMUNITY COLLEGES

Because Obama running for President frequently mentioned community colleges in his campaign speeches, there were high expectations among those in this public higher education sector from the new national administration. Now 15 months into his presidency, the results are decidedly mixed.

On July 14, 2009 Obama announced a plan to fund and improve community colleges nationwide. Called the American Graduation Initiative (AGI), Obama proposed spending to $12 Billion over ten years on community colleges with the goal, he said, “to help an additional 5 million Americans earn degrees and certificates in the next decade.”

Promising $1.2 Billion per year, the American Graduation Initiative support for community colleges was quite modest. With enrollment at community colleges at over 6 million and growing rapidly, the federal support would amount to less than $200 per student per year, money that would have been helpful to hard pressed colleges but not enough to significantly alter the educational landscape. Federal support did signify the recognition of the importance to the nation of community colleges and the prospect – long term – of increased attention.

While AGI rushed moved quickly through the House of Representatives, it stalled in the Senate, victim of the controversy over national health care legislation. Originally part of the student loan reform bill, it was dropped when that legislation passed as part of health care in March, 2010.

So give President Obama an A for raising the issue of national support for community colleges and Congress an F for not following his lead.

FEDS CHANGE STUDENT AID TO SUPPORT SUMMER STUDIES

The Logo of the Federal Student Aid from the U.S. Department of Education

Federal student aid is changing to reflect the realities of the lives of low and moderate income college students.  New regulations allow students to use Pell grant funds to support summer course work.  Because they have to work, many public college students, the majority at community colleges around the nation, take less than a full course load during the fall and spring semesters.  Supporting summer studies would help these students graduate faster.

According to the financial aid office at Springfield Technical Community college, the following are federal eligibility requirements for this new summer aid:

• Student must have a completed 2009-2010 FAFSA on file in the Financial Aid Office
• Enroll in a minimum of 6 credits during summer
• Student must be currently enrolled in a degree granting or certificate program
• Not graduating at the end of Spring 2010
• Student must be making Satisfactory Academic Progress and be in Good Academic Standing at the end of Spring 2010
• If a student received Pell Grant funds during the Summer 2009 from another institution, her/his eligibility for Summer 2010 may be affected

Additional reforms already announced will further aid incoming low and moderate income students.  Effective in the summer of 2011 newly enrolled students will be able to access federal aid for summer course work.  This will not only allow incoming students to get a head start on college requirements, but also provide a funding mechanism to support bridge programs for students to make up deficiencies in English and mathematics prior to the beginning of the fall semester.

The old model of college – a fall and spring semester in which students live on campus and go to class full-time – is relevant, primarily, to a minority of Americans whose affluent parents can support their studies.   It is encouraging that the Obama administration is changing federal financial aid regulations to catch up with the reality of most American college students.

How Community Colleges help North Carolina to lure new companies and keep old ones

Bill Ingram, President of Durham Technical Community College

A strong partnership with the state’s 58 community colleges is a cornerstone of North Carolina’s remarkable economic success.  (www.ncccs.cc.nc.us/ for more information about the North Carolina system). The state supports company expansion by generous training programs delivered by local community colleges.  According to William Ingram, President of Durham Technical Community College, “North Carolina would rather subsidize industry by paying for employee training than give tax breaks.  If the company moves the first strategy leaves behind an educated workforce while the second strategy may provide no lasting benefit.”

Like most states, North Carolina has a system of workforce development (also called regional employment) boards supported by federal funds.  President Ingram described this system as not being very significant to local community colleges.  President of the North Carolina Community College System, Scott Ralls, emphasized that direct state funds were the key to economic progress in North Carolina. “Our community colleges have a tradition of supporting economic development and the customized job program helps make that happen”, stated Ralls.

The customized job program in North Carolina, run by the North Carolina Community College System, is designed to help “industries improve their productivity and profitability to assure their continued presence in North Carolina .”  Even in a recession year, North Carolina provided $12.5 Million in new funds for this program in 2009-2010.  Because the community college system is able to retain unexpended funds from previous years, almost $20 Million is now available for North Carolina’s community colleges for workforce education and training.

N.C. Community College System President Ralls spoke of the long-term value of using community colleges to support employee training for local companies.  “Over time, our community colleges develop relations with companies that are very helpful in times of economic stress.” For example, when a company is thinking about consolidating, the local community college president can call company officials to work to ensure that local jobs are retained.