Student loan amnesty would $upercharge grad-magnetic New Orleans

Lifting the debt burden on college grads would be a shot in the arm for local economies, New Orleans in particular. Photo by Jed Horne


By Nathan C. Martin, The Lens contributing opinion writer |

New Orleans is home to seven four-year colleges and universities that graduate thousands of students each spring, and in the years since Hurricane Katrina has become a powerful magnet for well-educated transplants. Last year, in fact, we welcomed more of them per capita than any other city in the United States. This dynamic influx of educated young people is prospectively one of the city’s biggest assets in the effort to strengthen and diversify the New Orleans economy.

But there’s a problem: Heavy student loan debt accrued by recent graduates is a hurdle that prevents or delays young people from starting families, buying homes, and opening businesses—in short, the things that root people in a community.

Instead, they drift through the sour job market, tending bar and waiting tables, renting apartments that cost as much as their monthly student loan payments. A solution to this sorry state of affairs has been gaining traction nationally: forgive those students loans in whole or in part.

It’s a dose of fiscal stimulus that would unshackle what is potentially the most productive segment of the workforce—adding momentum to the nation’s painfully slow recovery from the Great Recession. Given New Orleans’ large population of recent college graduates burdened by debt, its entrepreneurial reinvigoration, and its enormous inventory of abandoned or damaged houses priced within reach of even a tight budget, the impact of a national student loan amnesty would benefit our hometown disproportionately.

Student loans recently surpassed credit cards as the nation’s foremost source of debt. They’re on track to exceed $1 trillion this year, the vast majority of it accrued in the past decade. College tuition skyrocketed in the past 30 years, rising over 400 percent since 1980, while the nation’s median income rose less than 150 percent. At the same time, the idea that a college degree is essential to success became ingrained in the national consciousness. To meet higher education’s swelling price tag, a generation went into debt on the confident assumption that their degrees would translate into professional positions from which they could pay back the investment. Clearly, what once seemed like a logical proposition—borrow, graduate, work, repay—now seems grotesque, given the magnitude of debt it has created.

According to a study by the U.S. Department of Education, roughly 66 percent of students who graduated from a four-year college in 2007-08 did so in the red. The average debt incurred was $27,803. The study by New Geography that identified NewOrleans as the nation’s top “brain magnet” estimates that 36,666 college graduates moved (or returned) to New Orleans between 2007 and 2009. If we pretend, for a moment, that 66 percent of those newcomers had the average 2007-08 level of debt, it would mean New Orleans attracted $670 million in student loan debt along with its coveted college-educated transplants. Roughly 90 percent of this debt would have come from federal loans, and ten percent from private. Even if we assume the newcomers’ accrued debt is only a portion of that $670 million—after all, not every graduate who moved to New Orleans in the past few years graduated post-2007—it remains a substantial burden, and relieving it would be a significant boost to New Orleans’ economy.

New Orleans is a city built on small businesses, and small businesses do wonders for economic growth, especially at two junctures: when they begin, creating new jobs and revenue, and when they clear the hurdle that separates small businesses from medium-sized businesses. Forgiving student loans would provide the huge number of recent graduates in New Orleans with a significant increase in disposable income: an immediate boon to the small businesses that undergird our consumer economy and a source if investment dollars for things like house purchases—and further business start-ups.

New Orleans has always been a hustler’s town, and lately it’s become more professional. Inc. Magazine named New Orleans the year’s “coolest” city for business start-ups, and Creative Cities International listed us as No. 10 on its 35-city “VitalityIndex.” Without student loan payments to make, how many would-be young entrepreneurs would take advantage of their freed-up capital (and time not spent working menial jobs) to start their own businesses? In an awful job market, why not help young people start businesses and make their own jobs? That they were passionate enough to move to New Orleans after Katrina speaks well of their prospects for success.

On the housing front, Mayor Mitch Landrieu just weeks ago announced a $52.3 million mortgage-assistance initiative aimed at encouraging first-time homeownership, which he called “key in revitalizing our neighborhoods across this city.” It will also reduce blight and stimulate the local economy, he noted. Forgiving student loans would provide at least as much assistance to first-time homebuyers in New Orleans as Landrieu’s plan, and likely several times more.

Around the same time that Landrieu was rolling out his mortgage-assistance program, President Obama announced a reform initiative that would allow borrowers to consolidate government loans for education into a single payment at a lower interest rate. The changes kick in next year—but don’t hold your breath. The initiative decreases, from 15 to 10 percent, the percentage of a borrower’s total income that can be charged for monthly payments. And borrowers must make payments for 20 years before student loans are forgiven, not 25 as is now required. As The Atlantic pointed out in an article that has been circulated widely on both the left and the right, the Obama plan would save your average graduate about ten bucks a month.

The longer politicians hem and haw, taking pathetic pokes at the student loan crisis, the worse off college graduates will be—and so, too, the broken national economy. New Orleans rightly takes pride and delight in its new-found appeal to young college graduates. Easing the student loan burden at this difficult time would be a way of maximizing their economic potential. Yet another stimulus plan? Call it what you will, but of the factors that paint a bleak future for young Americans, student loan debt is one of the most glaring. And in New Orleans, its erasure could be a boon to the entire city.

Nathan C. Martin is the editor of Room 220: New Orleans Book and Literary News.


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  • Charles Kent

    Thanks for you very well written article. I wish they would provide something not just for recent grads, bot for those of us who have already paid a substantial portion to just interest alone, mine is 45,000 paid back in interest alone already. I know that if I had that extra 700 a month, I would most certainly look into buying a home, and also establishing my side design business. We must remain hopeful on this.

  • Christie Mortenson

    As an optometrist looking at another 23 years of loan payback, I would truly stimulate the heck out of the economy without having to spend 800/mo on loan payback. What’s worse than paying back student loans? Paying back 2 to 3 times what you originally borrowed once the interest is accounted for. We all know that college costs have risen exponentially. Not only did we pay an exhorbitant amount to attend school, we then have to pay tons in interest to boot? That is no way to treat this country’s students. We sacrificed to go to school. Went without for however many years we were IN school (for me, it was 8). Now we get out of school and still can’t live comfortably? Where’s the American Dream? Where is the middle class going? Thanks for helping a valiant cause: forgiving all student loan debt, stimulating the economy, and bringing the middle class back!!!

  • Hooper

    Student loans do not only affect 20 somethings it crosses many generations. The national consumer law center is now representing students in their 80’s who took out loans 40 + years ago. These retirees are having their social security checks offset to pay for those loans, often leaving them at poverty level. The problem is that the interest is capitalized and fees of 25% are added to loans making it nearly impossible to pay them back. Proving hardship is impossible and death of the borrower is about the only way out of the loan.

    Taking on any consumer loan is not predictable. No one knows where the economy will be or how your health will fare over the years. But with most consumer loans, we all know that we have basic consumer protections. There are NO consumer protections when it comes to student loans. In 2005 even private loans became impossible to discharge in bankruptcy and these loans are not guaranteed by the US government. These private student loans are no different than any consumer loan with the exception that bankruptcy was removed. Retroactively.

    There are adults who went back to school thinking it would increase their earning power only to find no increase in income at all, only debt. These adult students now face the realization that they might never be able to retire at all.

    Once you default, the interest is capitalized and fees of 25% are added on. This quickly doubles, triples and and quadruple the original amount of the loan. While most students would have no problems getting back on track with the rehabilitation of loans, the guarantors of the loans have a conflict of interest. They make money while loans are in default and do not make money when the loans are rehabilitated. They prefer to keep them in default as this is their main income.

  • @Hooper — Would you be interested in writing an opinion piece on the effects of student loans on middle-aged and elderly students/former students? If so, please send me an email at mcalmes@thelensnola.org.

  • Matthew

    As a soon to be grad of UNO (had to stop going with only 10 credits left due to running out of student loans), I am left being on Social Security Disability, almost completely healed, with no way to get a job (need the degree to actually make enough to pay student loans back) and so I am stuck getting not even enough to survive on disability, while at the same time having to keep filling out forms to push back the payment dates on student loans, with no hope in sight. I WANT to remain forever in this community, using my soon-to-be psychology degree to help manage the mental health crisis in this area, but without those 10-credits, and without some sort of reprieve from this 50+ thousand dollars in debt, there is no way I will be able to not just remain in this area, but EVER recover from the mountain of debt left by trying to better myself and going off of disability. With the debt, and financial survival, it would be financially better to remain on disability!! We need to make it so those who are genuinely disabled (like myself) are able to better ourselves while recovering from a disability, and then move into society debt free– better to have the government help 50 thousand now than millions over my lifetime because me not being able to afford to go off of disability.

  • Jeff Wilkins

    Excellent idea but it should be extended so that those like me who have repaid their student loan debt can receive a credit for the amount paid back. It was a struggle for me to make those monthly payments and prevented me from doing a lot of things I wanted to do, preventing me from living in the apartment I wanted to live in. Receiving back from the government the amount of money I had to pay back in those many monthly installments would be a small step in compensation.