An eventful summer for student debt policy

In the brief few months of summer, the Supreme Court ruled on the long-anticipated case on federal student loan cancelation. In Minnesota, legislatures passed a bill funding higher education for tens of thousands of students.

Federal Student Loans

Beginning in March 2020, with the COVID-19 pandemic and subsequent government’s national emergency, student loan payments were continually paused throughout the Trump administration and into the Biden administration.

Later, in Aug. 2022, under Biden, the U.S. Department of Education announced $10,000 of student debt cancellation for most borrowers and $20,000 in cancellation for Pell Grant recipients. However, some Republican states sued, eventually leaving the case to the Supreme Court. This summer, the court ruled 6-3 to overrule the debt cancellation.

As a part of bi-partisan debt ceiling negotiations, interest will start accruing again on Sept. 1, and the first payments are due on Oct. 1. However, there are new policies to help ease any potential difficulties for the resumed payments.

There will be “a 12-month ‘on-ramp’ to repayment, running from Oct. 1, 2023, to Sept. 30, 2024.” According to the U.S. Department of Education, “financially vulnerable borrowers who miss monthly payments during this period are not considered delinquent, reported to credit bureaus, placed in default, or referred to debt collection agencies.”

Minnesota Expands Free Access to Higher Education

The North Star Promise Scholarship Program (NSP), passed in late May, allows Minnesota residents with a family-adjusted gross income of less than $80,000 free tuition and fees at Minnesota public universities, colleges and tribal colleges.

The NSP begins in the fall of 2024. NSP does not cover people who already have a bachelor’s degree.

The MN Office of Higher Education estimates it will impact 15,000-20,000 students in the first year. The program is expected to cost $117 million for the first two years and $50 million a year following that.

“This has catastrophic implications,” said NDSU President David Cook earlier in June. Last year, in the fall of 2022, 45% of NDSU students were from Minnesota. Many other higher education institutions in North Dakota also have a higher proportion of Minnesota residents.

It would affect not only the colleges and universities as many of the students from Minnesota continue to live and work in Fargo and North Dakota following graduation.

“If half of qualifying students chose to stay in Minnesota for free tuition, NDSU could lose 365 students a year at a cost of about $6.5 million in tuition and fees alone,” said Laura Oster-Aaland, NDSU vice provost, accessed from the Fargo Forum.

Many among the North Dakota Board of Higher Education, state legislature and education leaders are already beginning to work towards finding ways to mitigate the expected damages. This includes fighting for more funding from the state level, among other improvements.

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