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September 17, 2015

Lawmakers pitch solutions to college debt problems

As lawmakers weigh proposals to make higher education more affordable for Massachusetts students, advocates on Tuesday hailed efforts to increase financial literacy and expand college savings programs.

An extensive college affordability bill put forth by Joint Committee on Higher Education co-chairs Sen. Michael Moore and Rep. Thomas Sannicandro includes a provision that would make it state policy to annually appropriate enough money for the University of Massachusetts system, state universities and the community college system so that each school can "fully fund its operating requirements" and make necessary capital improvements.

Among other measures, the bill also calls for the development of a new funding formula for state universities that would take into account degree completion and other performance-based factors at each university, as well as its enrollment and cost of providing education.

The legislation would allocate $1 million for the state's Department of Elementary and Secondary Education to develop and implement new financial literacy standards and curriculum for Massachusetts students, teaching them about loans, debt, taxes, financing higher education, online commerce, banking and other money-related matters.

The state's public higher education institutions would also be called upon to develop financial literacy programs for their students, working with the Massachusetts Educational Financing Authority and education finance groups including the Boston-based American Student Assistance.

At a Higher Education Committee meeting on Tuesday, American Student Assistance President Paul Combe said that resources exist for students to manage their loan debts, but few are aware of the options.

"Today a highly educated workforce also means a highly indebted workforce," Combe said. "They go together. This is how we finance higher education today."

Combe said that the inability of debt-saddled graduates to spend their money elsewhere creates a drag on the broader economy as well.

Moore and Sannicandro's legislation would also establish a pilot program for a college savings account incentive, in which the state would match between $150 and $1,000 in deposits made by some lower income families.

Bob Hildreth, the founder and an executive director of a nonprofit called Inversant, said the matching program mirrors the mission of his group, which provides incentives for low-income families to save for college and learn about the process. The organization was formally known as FUEL Education.

Hildreth said a move to promote college savings accounts with government matching funds could be a key step in solving a student debt problem that hurts both graduates and colleges. "Imagine college savings reducing the need for college debt," he said. "Imagine low-income families taking control of their college financial path instead of that path leading to crushing burden."

The savings-matching pilot laid out in the bill would accept up to 250 applicants, selected on a first-come, first-serve basis from families whose income is at 250 percent of the poverty level or less.

Data compiled by the Massachusetts Educational Financing Authority suggests that lower- and middle-income families tend to be the ones taking advantage of college savings accounts, said Thomas Graf, the authority's executive director.

Graf said that 50 percent of college savings accounts, also known as 529 plans, have less than $12,000 in them. He also pointed to a survey the authority conducted with Fidelity Investments, which found that 75 percent of parents said they'd save more if incentives were offered.

"These incentives, I think, are critical to helping families offset the debt you see and read about everywhere," Graf said.

An additional provision of the college affordability bill asks the Department of Higher Education to study a "pay it forward, pay it back" system that would create another option for paying for college. Instead of paying standard tuition and fees, students at the state's public higher education institutions would have the option to sign a binding commitment to pay a certain percentage of their income back to the school or state for a set number of years after graduation.

 Rep. Jeffrey Roy testified in support of a separate bill he sponsored that would create a commission to study how such a system could be implemented, noting that Washington and Oregon have similar programs in place.

"As we know, student loan debt is killing students," Roy said. "The opportunity to get a college education is important. We recognize the need for a college education."

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