HARRISBURG – Senate Democrats on Wednesday rolled out a plan to help roughly 28,000 Pennsylvanians with high-interest student loans.
Under the plan, modeled after a similar but smaller program in Connecticut, the state would borrow $1 billion to offer lower student loan interest rates. It would cost taxpayers $80 million a year, said state Sen. Vince Hughes, D-Philadelphia, the party’s chairman on the appropriations committee.
“This is a priority of this caucus, (the Senate Democrats),” Hughes said.
The proposal would allow borrowers paying higher interest rates to refinance at 4 percent interest rates in a program run by the Pennsylvania Higher Education Assistance Agency, he said. Federal subsidized college loans now have 5.05 percent interest rates, and private student loans often exceed 10 percent interest rates, he said.
He said the plan is intended to “respond directly to provide relief to average folks in Pennsylvania.”
The lawmakers said that there are about 1.8 million Pennsylvanians who now have student debt. The Senate Democrats have yet to determine the qualifications that would be used to determine who can get assistance under the loan refinancing program.
Hughes said it will likely take into account the borrower’s income.
Hughes added that lawmakers would be open to subsequently expanding the proposal to help more borrowers.
The average Pennsylvania graduate in 2017 had $36,854 in college debt, second-highest in the country, according to The Institute for College Access and Success, which produces annual rankings of student debt by state. Nationally, the average college graduate left school owing $28,650, according to the group’s report, released in August.
The Senate Democrats’ proposal wasn’t included in Gov. Tom Wolf’s budget, and it’s unclear how receptive Republicans, who have the majority in both chambers of the state Legislature, will be to the plan.
Asked about this on Wednesday, Jennifer Kocher, a spokeswoman for Senate Majority Leader Jake Corman, R-Centre, only said: “Like with all proposals, this will be referred to the appropriate committee for proper vetting.”
In a Tuesday-morning briefing with reporters, Hughes was joined by Sens. Katie Muth, D-Montgomery, and Lindsey Williams, D-Allegheny.
Muth and Williams are both first-term senators and were two of the five Democrats who won seats in November that had previously been held by Republicans.
Muth, who is 35, said that the move to draw attention to the issue reflects how younger lawmakers like she and Williams understand how crippling student debt can be – more so than older politicians at the Capitol.
Muth didn’t say how much student debt she owes. Williams, who has a law degree, said she owes $125,000 in student debt.
Williams said that when she ran for office, she was criticized for not owning a home.
“My student loan payment is my mortgage payment,” she said.
Senate Minority Leader Jay Costa, D-Allegheny, said that the state’s been trying to address college affordability by providing more funding to colleges. This proposal would provide immediate relief directly to the students who had to borrow to stay in school.
Connecticut launched its student loan refinancing program in 2016. That program offers borrowers rate as low as 4.75 percent, according to the The Connecticut Higher Education Supplemental Loan Authority, which oversees that state’s student loan refinancing program.
Student borrowers in Connecticut graduate, on average, with the most debt in the country, according to The Institute for College Access and Success which advocates for more affordable higher education.
Connecticut was the only state in the country where students graduated in 2017 with an average student debt load higher than in Pennsylvania, according to the group.
In addition to the refinancing plan, the Senate Democrats propose offering a $500 tax credit to up to 20,000 people with student debt, while requiring more pre-borrowing counseling, increased price transparency from colleges and better data on interest rates available to borrowers.