In undertaking tax reform, lawmakers must prioritize college affordability
As student debt mounts nationally, with the $1.4 trillion in U.S. student loans now surpassing credit card debt, it’s critical to ensure Connecticut parents and students have smart college financing options. A little-known mechanism — tax-exempt Qualified Student Loan Bonds — provides Connecticut families an important pathway to finance their college dreams.
But as Congressional leaders tackle tax reform this fall, that tool could be on the chopping block. It’s among the types of municipal bonds at risk of losing tax-exempt status to broaden the tax base and make way for lower corporate and individual tax rates. That would take away an important vehicle for making college more affordable at a time when the cost of higher education is one of the most pressing concerns facing Connecticut families. As such, throughout the tax reform process, Connecticut’s Congressional delegation must work to keep this important college-financing tool intact.
As the price tag of postsecondary education continues to rise, existing federal loan options, such as the Federal Direct Stafford Loan, often fall short of fully covering the cost of a degree. Middle-income families in particular need support to help fill the gap.
Connecticut is among 21 states with nonprofit and state-based student loan providers, many of whom use tax-exempt Qualified Student Loan Bonds to help families manage the cost of college in a way that is transparent, responsible, and based around students’ and families’ specific needs. Because of their tax-exempt status, these bonds, in many cases, allow the nonprofit lenders that use them the ability to offer lower interest rates and lower monthly payments than many commercial lenders provide. That helps families save money and students avoid onerous debt loads that they too often carry with them for years following graduation.
Connecticut’s nonprofit, state-based loan provider, the Connecticut Higher Education Supplemental Loan Authority (CHESLA), offers Connecticut families a low-cost, fixed interest rate loan of 4.95 percent. And, in 2016, CHESLA launched Refi CT, which helps young adults make education debt more manageable by providing a refinancing tool that can help them lower their interest rate or their monthly payment. Refi CT offers fixed-rate refinancing loans as low as 4.75 percent, with no additional fees.
Low-cost loans are only one way that the nation’s nonprofit and state-based loan providers help make college accessible. In 2017, CHESLA, in conjunction with four other state agencies, established CT Dollars & Sense — a financial literacy web portal that provides Connecticut students and their families with a “one-stop shop” resource to help plan, save, and pay for college. CHESLA is also in the third year of its Need-Based Scholarship Program, which provides need-based college scholarships to Connecticut residents attending state or nonprofit degree-granting higher education institutions within the state. The awards provide students with additional assistance — other than loans — to finance their college education.
Helping families through the college financing process is especially critical in today’s economic landscape; a recent study from the Georgetown Center on Education and the Workforce reported that 99 percent of jobs added since the recession have gone to workers with at least some college education. Getting an education beyond high school is integral to landing a well-paying, 21st-century job, and a college degree offers a strong pathway to opportunity.
To give Connecticut students the opportunity for a good job and financial security, we have to ensure more families have the tools they need to succeed in higher education. Qualified Student Loan Bonds — and the nonprofit, state-based providers like CHESLA that utilize them — offer a proven way to fulfill that promise. As lawmakers approach the imminent task of revamping the tax code, they must ensure this critical tool is protected.
Jeanette W. Weldon is Executive Director of the Connecticut Higher Education Supplemental Loan Authority.