College and job training should be affordable to all, not just those who have money. When Alaska charges nearly double what the federal government charges for student loans — to those who want to better themselves through college or job training — that needs to be fixed. This summer, a dysfunctional Congress reached a bipartisan deal that sets loan rates at 3.8 percent, at a time Alaskans pay 7.3 percent (with small potential discounts worth a portion of a percentage point). Both federal and state rates will rise and fall for future borrowers depending on the movement of market interest rates, but the state rate is not affordable to many students.
If we want a strong, talented Alaska labor force, we should make college and job training affordable and reward those who return to Alaska to benefit our economy with their skills. Student debt exceeds $1 billion nationally, and it is the second highest debt burden Americans carry other than a home mortgage. So what can Alaska do?
The past three years I and many Democrats have called for student loan reform, and we are starting to get good responses from other legislators. If Congress can work out a bipartisan compromise, Alaska’s legislators can too.
With the cost of college at $50,000 a year or more, most students will need a state loan on top of their $8,000-$10,000 federal loan. You can get a used car loan in Alaska for 2.3 percent, but you have to pay two-and-a-half times that rate to further your education. It’s time for the Governor, Legislature and Student Loan Corporation to act.
This summer, I and others have been talking across party lines to seek a solution. If we can come up with a solution that can pass, and significantly reduce the cost of higher education, it will be good for Alaska. Credit doesn’t matter, and we’re open to all meaningful solutions.
House Bill 17, which I’ve prime sponsored with others the past three years, effectively grants a 3 percent rate reduction to Alaskans who remain here, or return after completing their college or vocational education. Currently, our bill says they have to finish in what state regulations call a “timely basis”, 6 years for a college degree. One potential change that came up this summer is to grant the 3 percent discount upon completion to all students who finish their degrees, even if they have to delay completion. That is fair and encourages Alaskans to finish their vocational and college degrees. And that benefits families and our economy.
Any solution needs to include fiscal restraint. Alaska used to grant full loan forgiveness to Alaskans who returned to the state after leaving to get higher education. But the Governor’s $1-$2 billion annual reduction in Alaska oil revenue is forcing the state into major deficit spending, so we opted to start with a less costly reform. High estimates are that our proposal will cost $3 million a year, though many analysts say the federal 3.8 percent rate will be profitable, and we have questions to ask of our Student Loan Corporation. The bottom line is that the state has to prioritize. Alaska spent $7 million on indoor tennis courts last year. Higher priority policies need to be put on the top of the list.
We’ll work to build consensus. For example, the Student Loan Corporation says it requires fewer employees to reduce loan principal by 2.5 percent than to reduce interest rates by 3 percent and that those two approaches both result in the same reduction — effectively a 3 percent interest rate discount. We went with this cheaper approach but are open to any good ideas and changes that build consensus on significant improvements.
What isn’t acceptable is the status quo. Money should not be an obstacle to career readiness. Let your legislator know your ideas for improvements. You can get legislator contact information at 269-0111. Share your thoughts!
• Les Gara is an Anchorage Democrat who serves on the House Finance Committee, and has pushed to make college and job training more affordable through lower loan rates and financial aid. You can reach him at email@example.com, or 269-0106.