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States Address Challenges Created by Student Loan Debt

By Andrew Smalley  |  March 3, 2021

As the COVID-19 pandemic continues, more than 44 million Americans carry an outstanding student loan balance. While the federal government has provided significant temporary relief for many borrowers, state policymakers are exploring additional actions to provide support and address the challenges created by debt. The more than 135 student-loan-related bills introduced in the 2021 session can be viewed in the NCSL Student Loan Bill Tracking Database.

As part of provisions enacted by legislation in Congress and by executive actions from both President Joe Biden and former President Donald Trump, federal student loan payments are deferred and interest is waived until Sept. 30, 2021. Additionally, all collection actions, penalties and fees are suspended through this period. The fiscal year 2021 Appropriations Bill also allows companies to pay up to $5,250 of an employee’s student loan payments annually on a tax-free basis through Dec. 31, 2025.

Approximately half the bills introduced in state legislatures in 2021 are related to forgiveness or repayment of student loans. At least 17 states will consider legislation to provide forgiveness to health care professionals, and 10 states have introduced bills offering forgiveness programs to educators. Other proposals for profession-based loan forgiveness include a public defender program in Florida and a program for pathologists in the state crime lab in Arkansas. Forgiveness bills in MississippiConnecticut and New Jersey would provide incentives for state residents who work in certain high-demand workforce areas.

Forgiveness, Oversight on the Rise

The volume of loan forgiveness legislation dipped to just six enacted bills in 2020 compared with 33 in 2019. This year, some forgiveness bills target relief to individuals disproportionally impacted by the pandemic. A Texas bill would provide up to $5,000 of repayment assistance for individuals who served as front-line workers during the pandemic, and a New Jersey bill would establish the Frontline Healthcare Worker Loan Forgiveness program.

At least 25 bills related to student loan oversight provisions, such as licensing requirements or student loan ombudsman offices, will be considered in sessions this year. Since 2015, 13 states have passed legislation to expand student loan oversight. ConnecticutNew Jersey and New York have introduced legislation requiring higher education institutions to provide students with additional information or annual letters to inform them about their debt. Bills to modify or create new tax credits or deductions have been introduced in eight states.  

NCSL will continue following all state legislation related to student loans in the Student Loan Bill Tracking Database and providing resources on common areas of state legislation.

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