At nearly $1.3 trillion, student loan debt has become a national crisis, now constituting the largest component of household debt for Americans. As of the end of 2016, the average student debt carried by more than 43 million college graduates exceeds $30,000, creating a financial hardship that ripples through the economy.
The crisis plays out at different levels in the nation’s states where the amount of student debt varies widely. The strength of a state’s economy is also a major factor in how well college graduates fare financially as they carry their debt burden into the real world.
Virginia Borrowers Face a Slow Economy
The Commonwealth of Virginia ranks right around the middle of the pack in terms of the average amount of student debt held and the percentage of students graduating with debt. The average debt held by Virginia college graduates is $27,800 and 59% of students graduate with student debt. While these numbers are below the national average, the $30 billion of total student loan debt in Virginia is a big threat to the state’s sluggish economy. There are nearly 700,000 Virginia residents carrying student loan debt.
For many college students, the investment in their future is not paying off for them or the economy. When they graduate and attempt to parlay their degree into a career, they are sandwiched between a mountain of debt behind them and a weak job market in front of them. Although Virginia’s unemployment rate is down to 4.8%, the unemployment rate for college graduates hovers around 8%. Most graduates take any job that is available, often paying less than they need to keep up with student loan payments and the cost of living.
As a whole, millennials are not buying homes or cars; they’re delaying marriage and families; and they’re delaying retirement savings. That’s not good news for Virginia’s economy, which has been stuck in low gear for the last several years. Should the new administration follow through on its promise to reduce the number of hires in the federal government, things could get worse for the state.
Virginia Considering More Refinancing Options
Virginia student loan borrowers have the same opportunities as borrowers in other states to seek ways to ease their hardship. For borrowers with federal loans, there is the option of consolidating loans and repayment options which could lower payments. Members of the Virginia legislature are trying to take it a step further by introducing a proposal to allow student loan borrowers to refinance their loans similar to the way a home loan is financed. Currently, only private banks offer consolidation while federal refinancing is not available through the Department of Education. The plan is to create a Student Loan Debt Refinancing Authority modeled after similar entities in Rhode Island, Connecticut and North Dakota.
The new entity would act as an independent lender, issuing new loans to replace any type of student loan held by student loan borrowers. The commonwealth would have to fund its startup, but it would be expected to become self-sustaining once it is underway. The plan is to have it become a profit center for the commonwealth of Virginia, while providing relief for Virginia student loan borrowers. The proposal is currently under review by the State Council on Higher Education in Virginia.
The new program can’t come soon enough for Virginia student loan borrowers facing a tight job market and a high cost of living in Virginia.
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