In a discussion with The Sacramento Bee about her first year as UC president on Tuesday, Janet Napolitano identified student debt as one of the most pressing national issues facing higher education at the moment. That’s surely not news to the many, many young people struggling with thousands of dollars in college loans.
More than 70 percent of college graduates leave school with average debt of $30,000 – IOUs that can take decades to pay off, even past the point of an entry-level salary. Although the average is lower in California, $20,000, that’s still a big cloud of debt hovering over what should be a sunny start to a career.
In fact, many in the workforce are chipping away at loans with interest rates that are two or even three times what most Californians would pay, say, on a mortgage.
That’s why the California Student Loan Refinancing Program, which authorized a state revolving fund to help college graduates refinance student loan debt, generated national attention when it was put forward in legislation by termed-out Assemblyman John A. Pérez and signed into law last month by Gov. Jerry Brown.
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Unfortunately, like all else associated with this pressing national issue, there’s fine print. A close reading of AB 2377, which would have leveraged a pool of state money to guarantee lower-interest refinancing through private lenders, reveals that, for all its promises, there’s little substance to the legislation.
For one thing, there’s no money in that revolving fund.
The $10 million analysts feel is necessary to effectively launch the program was never appropriated. A smaller pot of about $6 million in existing funds that the bill’s backers had had their eye on disappeared, not surprisingly, into the general fund.
Even if there were money, it would not be available to everybody.
Under the terms of the new law, only Californians with bachelor’s degrees, good credit records and jobs with the government or at nonprofits need apply for a refi. These are the same people who are such good bets for lenders that they can already qualify for refinancing, privately.
And many in that group – doctors and teachers, for instance – already can access special debt-relief programs available from federal and state loan-forgiveness programs. For them, the revolving fund would just be one more special favor. Perhaps that’s why the California Teachers Association supported it so enthusiastically.
Those with hope for the program say it’s a first step toward a genuinely useful debt-relief pool for Californians; now that the legal authority exists, they say, state lawmakers can just add money next year.
But as it stands, the only substantive thing about this fanfare-wrapped nothingburger is the free news release that came with it. And that’s beyond disappointing.
If legislators really want to do something and put their money where their mouths are, perhaps they could not only fund, but also broaden access to their empty pool of refi money. Or, better yet, find a way to underwrite income-based repayment arrangements for the many unemployed and underemployed student debtors out there. At the very least they could encourage pre-graduation debt counseling for college graduates.
Napolitano is right: A generation of college graduates staggering under a crushing debt load is, indeed, a pressing national issue. Empty promises don’t cut it anymore.