Debt-Free Higher Education

Debt-Free Higher Education

Young college graduates are putting their futures on hold as they struggle under the burden of high student debt – and a weak economic recovery that has failed to provide good jobs for them. Student loan debt has passed $1.2 trillion nationally, according to the Consumer Financial Protection Bureau. Such widespread debt has many causes and the ramifications are pervasive – including a decline in purchasing power.
High levels of family debt also often cause an increase in other types of debt, such as debt incurred from credit cards and medical bills, due to an already too-tight family budget. The average student debt has doubled since 2007 from $10,649 to $20,326. Consumer Financial Protection Bureau reported recently that outstanding student debt has surpassed $1.2 trillion and is growing rapidly – more than doubling in the last decade. In an effort to deal with the debt, families are forgoing or delaying important life milestones like having children, buying a first home, or purchasing a new car.



A recent survey by the National Association of Realtors shows that among first-time homebuyers, 54 percent indicated that student loans had a negative impact on their ability to save for a down payment. While home sales have largely rebounded from recession lows, the percent of those sales to first time homebuyers is down nearly 10 percent from historic trends. This lag in first-time homebuyers has the potential to drag down the entire housing market just as it is beginning to solidify.



The Federal Reserve Bank of New York released its own study of the student debt impact. From 2009 to 2012, those with student debt saw their rate of homeownership drop 50 percent compared to those without. The finding upended traditional thinking – that student debt signals higher earnings and higher chances of owning a home.



Click here for a chart illustrating the rising cost of higher education for students and their families.


In Maine, the percentage of students who graduate from our public universities within six years is 49 percent, compared to 56 percent nationally.



At the University of Maine system, one-third of first-year students don’t continue on to their sophomore year. There are many reasons students don’t start or finish college, but affordability is a major obstacle. Forty-eight percent of adults age 18-34 who do not have a four-year degree and are not enrolled in school stopped their education because they “can’t afford school.”  Nationally, 60 percent of dropouts had no financial help from family, compared to just 40 percent of those who graduated. Seventy percent of drop outs had no scholarships, compared to just 40 percent of graduates. Fifty percent of dropouts had incomes lower than $35,000, compared to just 25 percent of graduates.  



Maine could make public higher education debt free in a number of ways: dramatically increasing financial aid, making college tuition free for all students, or finding creative ways for the public to pay off debt for students.  Importantly, simply eliminating tuition for students does not necessarily eliminate debt, because of the many costs full time college students, particularly from low income, must finance simply to live and study.  While the fiscal impact of these proposals will vary, leaving us to wait to develop a revenue source for this particular policy, we encourage lawmakers this year to articulate the goal of debt free higher education as an important priority.  






[5]A Stronger Maine through Higher Education,” Lumina Foundation, 2013,



[7] In 2014, Congressman Michaud’s Maine Made plan put the cost of tuition-free sophomore year at the University of Maine system at $15.1 million annually. The cost estimate represents the amount the state would pay to fill unmet tuition and fees costs. For example, the state scholarship would not supplant other scholarships, but would replace student loan costs. Average tuition and fees for 2013 in the University of Maine System were $9,022. On average, the family contribution covers 37 percent of tuition and fees and loans cover 19 percent. In 2013, there were about 3,000 first-time, degree-seeking in-state students in the system.