Wednesday, July 25, 2012

Communities to Students: Let us help with your massive student loan debt!

Next American City has a great article on how cities and states are attempting to attract young people to their regions through incentives tied to student loan debt repayment.  The “brain drain” of many older industrial cities has plagued these places for decades.  The article shines a spotlight on a number of state and local initiatives that aim to both reverse this hemorrhaging of young, educated people to certain cities through offering students the opportunity for help in paying off their student loans – a policy issue that is only going to become more severe over time.  

Just recently news was release that American students have racked up over $150 billion in loan debt.  Over the past decade, student loan debt has soared 275%.  This has become an epidemic.  Just think, if many students have to pay back voluminous quantities of loans it delays their being able to purchase a car, a house, various consumer items, and most importantly to save for the future.   And this all relies on the student finding a decent job following college or graduate school.  

Most notably, the New Jersey Assembly introduced a bill last month that would provide financial incentives to recent college grads who move to certain parts of the state, including Camden, Trenton and Jersey City.  The bill is entitled, the Urban Scholar Revitalization Initiative, and it would offer up to $7,000 in reimbursement for tuition fees.  The policy of the program is straightforward in that the program would be administered with New Jersey’s already existing Urban Enterprise Zone Authority, “allowing businesses that receive tax credits under the program to earn further credits for helping recruit more young people to the program.”

Not wanting to be left out, the Midwest is getting involved too.  The state of Kansas, with 50 participating counties (called Rural Opportunity Zones rather than municipalities) will waive income tax for five years and provide up to $15,000 in loan reimbursements.  By October 160 people will already have received payments as new residents of the state.  Their neighbor to the north, Nebraska is now considering a similar program; a bill is on the 2012 legislative agenda.

Whether or not these policies will be successful in revitalizing communities is yet unknown – and is somewhat controversial.  On one hand, I can see it serving a mutual good in that students are able to pay down their loans in places that are more than glad to have them.  On the other it seems that these incentives are going to many students who would have been moving to these areas anyway as most of the participants that qualified for the Kansas program had regional ties.  Further, there are a myriad of other ways in which money could be spent which focus on young persons entering the workforce, including job training, educational scholarships, and mentoring programs.  

As Sean Andrew Chen writes in the NAC article, “If the program fails, it would be yet another example of wasted money that could have gone to services such as police and education.  But if it works, it could help bring much-needed investment and serve as a future model for other struggling cities.”  My guess is that these programs might bring some young people into these places, however the larger structural issues related to brain drain and displacement will continue unabated.  It is important to not only address the symptoms but also to confront the root cause.  Comprehensive strategies to address the difficult issues facing these communities are needed, success requires it, and whether or not these incentive policies are a significant aspect of a successful strategy – remains to be seen.

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