A number of community colleges have used federal relief funds to erase student debt. This approach makes sense for both the community college and the students. For the community college, it replaces funds that would otherwise be uncollected. For the student, it clears any outstanding balance that would prevent the student from returning to class.
The Connecticut State Colleges and Universities (CSCU) announced last week that it would forgive $17M in student debt that accumulated during the pandemic. CSCU’s gesture means that more than 18,100 students are now free to re-enroll in classes and finish their degrees. However, the debt forgiveness applies to student accounts, whether the students re-enroll or not. Erasing student debt does more than provide additional funds to the CSCU system. It also means CSCU does not have to expend effort to collect outstanding debt on student accounts.
Salem Community College in Carneys Point, NJ, will also forgive debt accumulated between Spring 2020 and Spring 2021. The move will erase about $400,000 on student account balances. SCC also issued about $665, 000 in emergency grants to its students.
The Community College of Philadelphia will forgive debt for about 3, 500 people. The move will erase about $2.75M in debt owed to the college. CCP will use its CARES fund to provide debt relief. It will use the Higher Education Emergency Relief Fund to provide additional financial assistance to students. CCP expects that the direct aid will help students maintain housing, pay for childcare, food and health care services.
Eliminating student debt is a win-win
It’s important to remember that universities and colleges that do not discharge debts will see less overall revenue. The debtor students will disengage (perhaps permanently) from the educational system. In this case, using federal funds to level student accounts at least opens the door for student to return to classes without having to erase perhaps thousands of dollars in debt.
The decision to work with students to remove barriers to education is key to boosting post-pandemic enrollment. Many students who owe a balance on their accounts may simply assume that there is no other alternative to dropping out of their academic programs. That’s a decision that could affect both their credit and their earning potential for years.
Student debt forgiveness is one meaningful way to meet the demands of the federal funding program. It provides much-needed revenue that would otherwise be uncollectable. It could also eliminate barriers to enrollment and minimize the impact of the pandemic on students’ long-term student earnings. That could be significant because households with student debt owe on average more than 500,000.
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