Capital Beat: A tale of two student debt relief plans

Months into the Democratic presidential primary process, one thing is clear: Student debt is top of mind for many voters.

It’s become a key question for voters in photo lines. It’s featured in some candidates’ platforms – most notably with Massachusetts Sen. Elizabeth Warren’s promise to use a wealth tax to fund a generous income-based debt forgiveness plan.

And it’s no surprise: New Hampshire has the fourth highest per-student average debt-load in the country ($34,415), and the highest portion of residents with outstanding debt (74%), according to 2017 figures from the Institute for College Access and Success. Practically everyone is feeling it.

The issue hasn’t gone unnoticed in the State House. Both the governor and the Democratic legislative leadership included plans to address student debt in their budget proposals this year.

On the one side is a plan to put aside $5 million in student debt relief for those who enter regenerative manufacturing industries in New Hampshire, such as Dean Kamen’s Advanced Regenerative Manufacturing Institute in Manchester – in addition to a one-time $6.3 million investment to health care workforce debt relief.

That would be the Democrats’.

On the other: a $15-million-a-year plan to build a debt-relief program eligible for those working in the state for a minimum of five years in industries determined by the state. 

That’s the proposal from Gov. Chris Sununu.

To drive that home: On an issue long seen as a liberal domain, New Hampshire’s Republican governor has seemingly taken the lead, while the state’s Democrats are focusing on a more modest aid package and a public-private partnership model.

How did we get here?

The reasons are complicated, but they boil down to a simple dynamic. Funding student debt relief – at least the way New Hampshire political leaders have approached it – necessarily means taking away investments from student scholarships. Democrats have been reluctant to do that. Sununu argues both can be done at once. Here’s a breakdown:

On paper, Sununu’s proposal sounds straightforward: $15 million in debt relief. But the funding is a little more complicated.

In order to pour $150 million over 10 years into a new program, Sununu has chosen to divert money that would have gone toward college and university and endowments – for scholarships.

That diverted money doesn’t come directly from state taxpayers. Rather, it comes from a percentage the state takes out of New Hampshire’s increasingly popular Fidelity 529 college savings plans.

Confused? Let’s break that down. 

Since 1999 New Hampshire has offered college savings plans under the “Unique” program, created after a federal law passed allowing the creation of tax-advantaged college funds. Those are overseen by the state but managed by Fidelity Investments.

If a family wants to put aside money for their child’s college expenses, they can open an account, put in a minimum deposit and watch the money grow. But like any investment fund, a small percentage of the account goes to annual administrative fees – both to Fidelity Investments and to the state of New Hampshire.

That’s the chunk of money Sununu wants to use for debt relief. Right now, most of it is going to scholarships.

Currently, 20% of the state’s administrative cut – about $15 million to $16 million a year these days – goes to direct scholarships overseen by a state board. The other 80% is handed over to universities to house within their endowments, for the express purpose of handing out the scholarships themselves.

And there’s the rub. Advisers to the governor argue that even though there are rules stating that the universities and colleges – both public and private – must spend that money on scholarships, the minimum payout thresholds are relatively low.

Records show that many colleges and universities take the state money, pay out the bare minimum in scholarships as dictated by the program’s rules and sit on the rest. And over the two decades since the program has started, they’ve managed to sit on plenty: Over $112 million is now sitting there, not being spent by the schools on scholarships.

The governor’s office argues that with so much sitting in those endowment funds, and with those funds generating their own growth, there is no longer a need for the state to add more every year. That future money would be better diverted to debt relief, they say.

Democrats, meanwhile, have protested that any money be diverted from scholarships for debt relief. They have their own setup in mind.

The Democratic plan for student debt is twofold. First, it put aside $11.3 million for relief for graduates in specific fields.

Five million of that would go to who have spent at least five years working in a New Hampshire regenerative manufacturing industry. That’s in keeping with a 2018-passed law that mandates the state do that – one passed to bolster ARMI’s status as a beacon for New Hampshire’s nascent medical tech industry.

An additional $6.3 million would go into the existing State Loan Repayment Program – the mechanism by which graduates in medical fields can have up to $75,000, depending on their field, provided they work in the state for three years. That’s a major increase from 2018, in which the Legislature appropriated $700,000 to the program, which medical professionals say brings in a major impact.

Rather than divert future state investments into scholarships, Democrats paid for that $11.3 million through direct state appropriations.

Of course, $5 million in one-off funding to a specific industry is an easier arrangement than $15 million a year for a state-wide program.

The second part of the Democrats’ plan? Put the ball in private businesses’ court. Under Senate Bill 12 – which became law last week – businesses, organizations, state entities and anyone else who employs people would be encouraged to pay off at least $1,000 in loan debt for their employees.

Those that did could participate in the Graduate Retention Incentive Partnership, or GRIP. There’s no seed money from the state; the businesses would pay the money, which would be taxed as income. The main advantage: The Department of Business and Economic Affairs would add participating businesses to a directory on its website for those looking for New Hampshire jobs that could alleviate debt.

If all of this sounds more modest than what Sununu has proposed for debt relief, that’s because it is. Democrats aren’t pouring nearly as much money into the effort as the governor had proposed. 

But that’s by design, argues Sen. Jay Kahn, the Democratic chairman of the Senate Education Committee and an architect of Senate Bill 12. Rather than focusing the money on those who have left the college pipeline, Democrats are striving to help those entering it: high school students who could choose to study in-state but are often going elsewhere.

Boosting scholarships and increasing funding to keep state tuitions steady could have a more profound impact on retaining young workers than student debt repayments, Kahn argued.

The goal, Kahn said in an interview, is “to help expand the high school to New Hampshire college pipeline.”

“And that’s avoidance,” he said. “By providing that emphasis, it’s saving needy New Hampshire students from having to take on additional debt to attend.”

Senate Majority Leader Dan Feltes hit back harder, arguing that Sununu’s proposed restructuring of the 529 endowment plan would dismantle the scholarship program as written, calling it a “one-off political stunt.”

“Sununu is mixing up different endowments, doesn’t have a new college affordability plan at all, and just reshuffles money away from something Jeanne Shaheen and Sylvia Larsen worked hard to create to expand educational opportunities,” Feltes said in a statement, referring to the former governor and Senate president.

The statement did not address the Democrats’ own reshuffling of that program. Under the Senate budget proposal, the Unique administrative fees would be significantly reallocated –with 80% being directly administered by the state and only 20% going directly to universities. But under that reshuffle, the money would still be solely directed to scholarships. 

None of the arguments have done much to placate Sununu, who has railed for months about House and Senate Democrats’ decision to remove his debt plan from their budget proposals. It was on his mind last weekend when he let Kahn’s Senate Bill 12 pass into law without a signature, calling it “political window dressing.”

“This innovative program would have been funded with over $150 million over the next 10 years, none of it coming from taxpayers,” the governor said of his own program. “Unfortunately, the Legislature replaced this program with a $1 broken promise to the students of New Hampshire and I will not endorse such a measure.”

But with budget talks unresolved, it remains to be seen what he and others could endorse.

Correction: An earlier version of this story omitted a $6.3 million appropriation proposed by the Democratic Legislature to go toward health care worker debt relief.