In Monday’s New York Times article about a new state student loan program for New York, a spokesperson for Governor Paterson’s budget office said, “One of the big problems in the student loan program is that it is drying up. People who were able to get loans last year can’t get them this year.” This kind of misleading statement encourages students and parents – already rattled about how to pay for college – to believe they’ll have trouble getting the most common and affordable type of student loan: a federal loan. In fact, federal student loans remain fully available to all eligible students and parents.
The New York program will encourage undergraduates to borrow up to a stunning $50,000 in state loans, even though dependent undergraduates can already borrow up to a total $31,000 in federal Stafford loans. These federal loans have lower interest rates than the New York loans and come with significant borrower protections and guaranteed access to affordable repayment options.
While it is true that the availability of private student loans has declined due to changes in the broader financial markets, only 8% of the undergraduate class of 2007 used private loans, and an estimated 40% of them had not maximized their federal borrowing options first.
If the goal of the new loan program is to make college more affordable, it misses the mark. Nationally, more than two-thirds of students who graduate from four-year colleges already carry an average of about $22,000 in student loan debt – with similar numbers for New York state. Struggling students should not be burdened with more debt, which will leave them even less able to buy a home, support a family, or save for retirement when the economy picks up again. Instead, tough economic times require states and the federal government to invest in higher education in ways that reduce the need to borrow.