Higher education is a boon to graduates and Maine’s economy. It increases degree holders’ lifetime earnings, improves business competitiveness, and spurs consumer spending. But escalating college debt and rising rates of student loan defaults threaten to derail the benefits of higher education for Maine’s families and our economy. Money that normally would be spent at local businesses or to support household needs is tied up in loan payments and interest ― resulting in a loss of jobs, decreased spending, and reduced economic security for families.
A new policy brief by MECEP Associate Director Jody Harris shows that Maine student borrowers struggle to repay their loans to the detriment of the state’s economy, while unscrupulous for-profit colleges and student loan servicing companies increase student borrowers’ debt and make it more difficult to pay down their student loans.
As policymakers prepare for the next legislative session, solutions to mitigate the damaging effect of education debt on Maine’s economy and to increase accountability for loan servicers and for-profit colleges should be a priority.
Key findings in the policy brief include:
- Maine’s education loan borrowers owe nearly $6 billion in federal student loan debt. Harris’ analysis shows that the debt and interest carried by student borrowers would support 6,000 jobs and generate $726 million in spending at local businesses if it were circulating through Maine’s economy instead of going to federal lenders and loan servicers.
- One in five Mainers owe money for their college education, including 20,000 Mainers over 60 years old. Those seniors, who make up the fastest-growing population of borrowers, carry a half-billion dollars in education debt.
- Loan default rates in Maine doubled from 2004 to 2018, with 10 percent of borrowers now in default.
- The effects of debt follow borrowers for decades. Nationally, half of education borrowers are still paying off their loans 20 years after they left college.
- While large debt holders command the most public attention, borrowers with smaller total debt loads are most likely to default.