Last Tuesday, state Sen. Jim Ananich (D–Flint) and state Rep. David Knezek (D– Dearborn Heights) introduced a proposal that may lift the burden off some low- and middle-income Michigan college students. The proposal, called the Smarter Michigan and Retaining Talent Tuition Program, would provide college students interest-free loans if they agree to pay a small percentage of their income back after graduation. Michigan legislators should work to pass SMART because it provides a more reasonable approach to paying student loans and could make college more accessible.
SMART will begin as a five-year pilot program with $2 million of loan funding. The loans will be given to 200 in-state students whose adjusted gross income is less than $250,000. Half of the students awarded would attend an in-state public university, while the other half would attend an in-state community college. If more than 200 eligible students apply, then students will be randomly chosen out of a lottery. Loans will not exceed the cost of tuition. For every year a student receives the loan, they will have to pay back five years’ worth of payments. If the student went to a community college, they will have to pay 2 percent of their adjusted gross income, while a public university student would pay 4 percent. Community college students can’t take out more than three years’ worth of loans, and public university students can’t take out more than five. Since these rates are fixed, and the repayments stop after 15 or 25 years depending on the school type, this means some students would pay less than they took out, and others would pay more, depending on their post-graduation income. The program requires that all awarded students must maintain at least a 2.5 grade point average, which ensures that students spend their time in classes instead of juggling multiple jobs.
This forward-thinking plan will benefit college students and the state economy because it prevents lifelong debt by capping the number of years a student will have to pay back the state. As of 2013, 62 percent of Michigan students graduated with an average amount of $28,840 in debt. This becomes even more problematic for students who continue their education, or have a reasonable gap between graduation and their first job. Unlike normal loans, repayments for this loan will start once the student starts a job and earns an adjusted gross income above the federal poverty level. This makes it much more feasible for a recent graduate to pay back a large sum of money right after they enter their first full-time job.
College could become more accessible to lower-income students with this program, and has proven to do so in other countries. With a degree, students will be able to go into higher-paying fields and pay back into the system, making it self-sustaining over time. Countries like the United Kingdom and Australia have student repayment programs in place for their entire country. In Australia, the payment repayment program has been very successful, as “it has financed expanded access to higher education, contained tuition subsidy costs to taxpayers and managed risk for students and graduates. There is no such thing as student loan default in Australia.”
Students should not be discouraged from obtaining a college education because of the price. Michigan should pass this proposal while putting forward even more legislation that makes college more accessible and less of a debt trap. While the Health Care and Education Reconciliation Act passed under Obama’s administration has the ability to help many students and control student debt, state legislators need to do their part to provide their students with more opportunities for an affordable college education.