Today’s Policy Agenda: Families Are Taking on Less Debt to Pay for College

by Callie Gable

Families are relying less on loans to pay for college.

In the Wall Street Journal, Karen Damato reports on a Sallie Mae study that found American families took out fewer loans to pay for college last year. In 2014, families took loans for 22 percent of the cost of college, as opposed to 27 percent in both 2012 and 2013.

For low-income families, a big increase in grants and scholarships made the reduced borrowing possible, said Sarah Ducich, a co-author of the report. For higher-income families, the continued strong stock market enabled them to take out more dollars from investment accounts.

One obvious explanation for this: Student-loan interest rates have been rising from especially low rates paid for by the federal stimulus package and a couple extensions to that program. Instead on taking on debt, students and families have both been contributing more upfront, and a larger number of parents dipped into their retirement savings to foot the bill (it’s possible they’re doing so because a rising stock market has boosted their savings). Some families also made other cost-saving efforts, like sending their kids to two-year institutions or to public schools.

The New York Times’ Upshot noted the other day that, as college tuition costs are rising rapidly, the actual price paid by attendees and their families isn’t rising quite as quickly. But in part that’s because they’re reducing the price with subsidized loans, and even as families are taking out less in loans, they’re still taking out a whole lot of them: Of students who graduated with bachelor’s degrees in 2014, 70 percent had debt, with the mean amount owed reaching an all-time high of $33,000. 

States make plans to avoid Obamacare’s Medicaid funding cliff.

Kaiser’s Phil Galewitz reports that six states and the District of Columbia plan to extend the Affordable Care Act’s increased Medicaid payment rates to primary-care physicians, which are currently financed by the federal government and set to expire in 2015. The higher rates were in line with Medicare payment rates and amounted to an average 73 percent payment increase. But the funding is disappearing, as this chart from Investor’s Business Daily shows:

States and physician groups have long worried about the consequences of the payment boost’s expiring, and now some states fear that access to care will be comprised unless the increase is extended. But there’s little evidence to suggest that higher payment rates increased the amount of doctors who accept Medicaid nationally, so it’s not clear extending them is necessary or desirable.

Interestingly, two relatively poor red states, Alabama and Mississippi, are going to to extend the payment rates, at an annual cost of $32 million and $12 million respectively (both states opted out of the Medicaid expansion). Other states extending payment rates are New Mexico, Colorado, Iowa, and Maryland, all of which did expand Medicaid.





The Agenda

NRO’s domestic-policy blog, by Reihan Salam.