Student loan debt is second only to mortgage debt in America, totaling out to about 1 trillion dollars. This is a serious financial hit for graduates, especially in a fairly weak economy. But, some Alaska legislators are working to reduce the burden on students.
Representative Les Gara, and six other Democrats, are the primary sponsors of a bill pre-filed on Friday that takes aim at reducing student loan debt for Alaskans.
The initial intention was to reduce student loan rates by 3 percent if the student either stays in, or moves back to Alaska after graduation, but Gara says the Alaska Student Loan Corporation proposed an alternative of an annual 2.5 percent principle reduction.
“The reason they prefer a principle reduction is it’s much easier to administer with less staff, so it’s a cost savings, but it’s the equivalent of a 3 percent interest reduction,” Gara said.
This means that each year the Alaska Student Loan Corporation would chisel off 2.5 percent of the principal of a student’s debt.
Molly Towner is an Anchorage-area teacher and single mother of two children. She went back to school to get her master’s degree to become a teacher. Since graduating six years ago, Towner has been paying about $600 a month towards her student loans.
“I feel very lucky compared to most of the world, but it is very tight, and some relief on the student loan amount would be big help to our family,” Towner said.
She still has over 15 years left before her loan will be paid off.
Gara says student loans can be a deterrent for people looking to go to college.
“We believe that money should never be a barrier to college, to job training, to vocational education, but in Alaska, the student loan rate hovers around 7 percent, when at the same time you can get a used car loan for 2.5-3 percent,” Gara said.
Gara says if the legislation passes, the Student Loan Corporation will likely ask for an appropriation from the state to help fund the student loan reduction, though the amount is unknown at this time.
Listen to the full story