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.