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For Minnesotans mired in student debt, help could be on the way

Juliana Keen, advocacy manager with Lutheran Social Service of Minnesota, testifies before the House Higher Education Finance and Policy Division on a bill sponsored by Rep. Laurie Pryor, left, that deals with student loan debt counseling. Photo by Paul Battaglia
Juliana Keen, advocacy manager with Lutheran Social Service of Minnesota, testifies before the House Higher Education Finance and Policy Division on a bill sponsored by Rep. Laurie Pryor, left, that deals with student loan debt counseling. Photo by Paul Battaglia

Congratulations, graduate! Welcome to years of debt.

Such is a reality for your average college graduate in Minnesota, as 68 percent of state residents who earned degrees in 2017 did so with debt. That’s the fourth-highest percentage of any state, according to the Institute for College Access and Success.

But help could be on the way.

Two bills were laid over Tuesday by the House Higher Education Finance and Policy Division for possible omnibus bill inclusion. One would appropriate money for student loan debt counseling, while another would expand eligibility for a student loan refinancing program.

HF550, sponsored by Rep. Laurie Pryor (DFL-Minnetonka), would be something of a refinancing of its own, in that it would take what was a temporary pilot program and appropriate money to make it permanent.

The Office of Higher Education granted Lutheran Social Service of Minnesota $150,000 in 2015 to counsel borrowers on how to go about paying off their loans. According to Becky Pakarinen, program director of financial counseling for the organization, it was quite successful, with 99.5 percent of participants staying current with their payments, 97.6 percent developing monthly budget plans, and two-thirds increasing their credit scores within a year.

House panel hears student loan debt counseling bill 2/26/19

Pakarinen said that 12,441 Minnesotans defaulted on student loans in 2015, but she believes they all could have avoided those defaults with debt counseling.

The bill leaves the size of the appropriation open to negotiation, but Lutheran Social Service officials said $150,000 would allow it to counsel 1,000 borrowers in a year, while $375,000 could help serve 2,400 borrowers.

The companion, SF306, sponsored by Sen. Rich Draheim (R-Madison Lake), awaits action by the Senate Higher Education Finance and Policy Committee.

Sponsored by Rep. John Huot (DFL-Rosemount), HF583 would expand the Office of Higher Education’s Student Educational Loan Fund Refi program, by adding more funding and reducing the requirements related to an applicant’s credit score and debt-to-income ratio. In other words, the state’s student loan refinancing program would start taking on higher-risk borrowers.

While Huot introduced his bill as a “please get the kid out of my basement” bill, Pakarinen had earlier cautioned against that stereotype.

“The fastest growing group that has educational debt is older adults,” Pakarinen said. “Many returned to college during the great recession when unemployment was high. Fast forward 10 years and many of these student loan borrowers are looking forward to retirement, and realizing they can’t because they have large sums of student loan payments. … Also, parents and grandparents are co-signing on private loans for their loved ones to attend college and taking full responsibility for that student’s debt.”

The companion for Huot’s bill is SF1800, sponsored by Sen. Greg Clausen (DFL-Apple Valley). It’s been referred to the Senate Higher Education Finance and Policy Committee.


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