Means-tested grants, employer incentives may help students more

The reaction to President Biden’s student loan forgiveness plan has moved beyond early elation in some quarters to skepticism from workers who didn’t go to college, economists worried about inflation, tax law experts, and even some union leaders and advocates for higher education.

It has also elevated discussion of Wisconsin solutions that may lead to a more targeted, long-term approach that can reduce the cost of college for those who need it most while involving businesses earlier in recruiting talent.

The federal loan forgiveness plan would wipe away at least $10,000 in higher education debt for borrowers earning less than $125,000 per year, with several hundred thousand borrowers in Wisconsin alone potentially getting relief from billions of dollars of debt.

Advocates have been calling for a relief program for years, arguing indebted students can’t fully contribute to the economy if they’re burdened by seemingly endless payments.

Others wonder if a forgiveness program glosses over rising tuition and fee costs (Wisconsin public university tuition remains frozen for most in-state students) and ignores that some students invest a lot of money in degrees that don’t lead to a well-compensated career — or who quit before getting any degree at all. While that’s true for some students, national studies show people who complete two-year or four-year degrees earn more in their lifetimes than people who don’t.

Complicating the debate is Wisconsin tax law, which says people who are forgiven some or all student debt will likely pay state income taxes on that relief. Wisconsin is one of a relative handful of states that doesn’t follow federal tax code in this case, and it would require a legislative change to conform.

Whether or not the federal loan plan is actually carried out, there are ways Wisconsin policymakers can help close to home.

Invest in the long-term economic value of higher education. Study after study has confirmed the economic value of post-high school education. This can take the form of a college degree or credentials in vocational and tech-based trades. Wisconsin needs doctors, nurses, and teachers … it also needs welders, electricians, and transport drivers. It’s time to examine how state government can better target specific workforce needs.

Develop talent through means-tested student aid. Tuition freeze laws and loan forgiveness are not the only (or even the most efficient) ways to make post-high school education affordable. Means-tested student grants through the federal Pell Grant program and the Wisconsin Higher Educational Aids Board (“Wisconsin Grants”) target those who most need the help.

In the case of Wisconsin Grants, it helps keep homegrown students in Wisconsin. Annual appropriations for Wisconsin Grants should be raised to bring the state to Minnesota’s level for grant spending per undergraduate. As is currently the case, grants should be apportioned among students in the three sectors: 55% for UW students, 20% for technical college students, and 25% for Wisconsin citizens attending a private, nonprofit college in this state.

This cost would be spread over multiple budget cycles and would pay for itself over time through rising per capita incomes and tax collections tied to that revenue growth.

The Wisconsin Tuition Promise, modeled after a successful UW–Madison program, is a new effort to close the gap for low-income students after Pell and Wisconsin Grants are awarded. Like the Pell and Wisconsin Grants, the process would be based on student FAFSA (Free Application for Federal Student Aid) filings and calculations by admissions offices. The Wisconsin Tuition Promise is a “last dollar” program aimed at helping the neediest but otherwise qualified students.

Build talent through employer incentives. Wisconsin employers, with the incentive of a state “Future Workers Tax Credit,” could better attract and train well-qualified workers. A Future Workers Tax Credit would provide incentives to employers to invest early in education, training, and apprenticeship of future workers, empowering employers to determine the skills and abilities they most need. Such a credit could focus on critical occupations and low-income students while they are still in school. This could keep more students in Wisconsin to pursue jobs and careers.

If nothing else, the debate over loan forgiveness has focused attention on what kind of talent the economy needs and how to produce that talent in a fair, efficient manner. Some ideas afoot in Wisconsin could help.

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