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Press release/statement

New Demos Report On Federal-State Partnership To Reduce Student Debt

(New York, New York) — As the country struggles to find remedies for its growing student debt problem, the national public policy organization Demos has released The Affordable College Compact, a new a proposal for a federal-state matching program to alleviate this burden for students and address many of the contributing factors of rising college costs, most notably state disinvestment.

Nearly three out of four college students attend public universities. With a majority – 64 percent – of these bachelor’s degree graduates leaving those colleges with student debt, this policy proposal would base matching funds and awards on a school’s commitment to higher education as a public good. Using state-by-state data, the brief finds that 26 states would currently be eligible for federal match funding under the Affordable College Compact – impacting approximately 7.2 million poor, working and middle-class students.

“Just a generation ago, college students could take on a part-time summer job and pay for the entirety of a year’s education,” said Mark Huelsman, report author and Senior Policy Analyst at Demos. “But, over the past 25 years, we’ve seen state funding for students drop by 29 percent. This not only leaves students with no other option outside of borrowing, but it also threatens our system of higher education as a worthy public investment.”

To be eligible for federal match funds, states would be required to commit that revenue from tuition does not exceed revenue from state appropriations. By doing so, states would then qualify for one of two matching grants, depending on the level of state commitment.

The first, a 20% match on every dollar spent on public higher education, would require states to:

  • maintain minimum per-student funding levels
  • ensure that college costs are distributed more equitably for all students

Second, to ensure that a state institution receives the 60% match on every dollar spent on public higher education, a state must:

  • commit to debt-free higher education for students at or below 300% of the poverty level
  • publish better data on student outcomes
  • ensure that struggling borrowers who do take on student debt are provided with debt-relief options, including debt-for-service or refinancing programs

Additionally, states that go above and beyond previous per-student funding levels should receive an additional 40% match.

“A college education is still the primary pathway to the middle class, yet the average college graduate leaves school with almost $30,000 in debt,” said Huelsman. “Even if each of the currently eligible states kept their overall educational appropriations at their present level, this proposal would go a long way in making student debt the exception to the rule, just as it was a generation ago.”

The Affordable College Compact is part of Demos’ ongoing work advocating for a return to debt-free college. In early 2012, Demos released The Great Cost Shift, which looked at the negative effects of the downward trend in state investment and how this has impacted today’s middle class. Later that year, Demos published The Contract for College, part of the Millions to the Middle series and a policy proposal that outlined new options for the most financially strapped college students – including reinvestment in community colleges and access to higher education for academically excelling students who lack legal immigration status. Finally, in 2013 Demos released At What Cost?, which examined the lifetime wealth loss for dual headed, college educated households.


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