This State Wants to Help Recent Grads Pay Back Their Student Loans

New York is extending a helping hand to financially struggling borrowers.

A State University of New York commencement ceremony. (Photo: Facebook)

Jan 5, 2016· 2 MIN READ

Culture and education editor Liz Dwyer has written about race, parenting, and social justice for several national publications. She was previously education editor at Good.

With the average college graduate owing nearly $30,000 in student loans—and total student loan debt topping $1.3 trillion—it’s no surprise that thousands of recent grads have expressed dissatisfaction with their lives. Sure, as the years go by, a college degree is more likely to open the door to steady employment and the middle class. But in the meantime, folks forking over a significant chunk of their earnings from an entry-level job to repay student loans, while also struggling to pay rent, are questioning whether higher education is worth it.

It’s a bleak situation but it looks like some recent grads living in New York state might have reason to celebrate in the New Year. On Dec. 31, the state launched its "Get on Your Feet" Loan Forgiveness Program, an initiative whereby the state will make monthly federal student loan payments for recent college graduates who are struggling most.

"Ensuring students are able to pay for college and not saddled with debt is critical for both their individual success and the continued economic growth of New York State," Gov. Andrew Cuomo said in a statement. "With this program, we are telling recent graduates: if you invest in New York's future, we will invest in yours."

Taking on these payments is expected to cost the state $41.7 million per year by 2020, but a generation burdened by debt has the potential to cripple the economy. People with student loans are less likely to be entrepreneurs and more likely to postpone buying a home. An analysis in 2014 of government data by the Pew Research Center also found that young graduates with student loan debt are more likely to have significant amounts of high-interest credit card debt. After all, if a good chunk of their salaries goes to paying for a degree, they end up charging basics like groceries and gas.

Given those factors, it's no wonder that the New York State Legislature approved the program, which will help ensure young grads are financially freed up to make choices that will boost the local economy in the long term.

The state isn't going to pay the student loan debts of just anybody. The eligibility requirements focus the benefit solely on tried-and-true New Yorkers. Only people who attended high school in New York state, who graduated after December 2014 from a college or university in New York state, and who have lived in-state for the past 12 months and earn less than $50,000 are eligible. Applicants must also enroll in either the federal Income-Based Repayment Plan or Pay as You Earn Repayment Plan to participate.

Of course, one other common-sense way to tackle the burden of student debt is to prevent it in the first place. Both Hillary Clinton and Bernie Sanders have said that undergraduate tuition should be free, and an analysis by The New York Times in October found that a 5 percent tax increase on the wealthiest 1 percent of Americans could cover the cost of in-state tuition for every student at every one of the nation's public colleges and universities.

Meanwhile, more than 2,500 graduates from the class of 2015 have signed up within the past week for "Get on Your Feet." The program's office expects that up to 7,100 recent graduates will take advantage of the loan payment plan by the end of 2016, and by 2020, about 24,000 people will enroll.