BILL NUMBER: S861
SPONSOR: BAILEY
 
TITLE OF BILL:
An act to amend the education law, in relation to establishing the New
York college debt repayment program
 
PURPOSE OR GENERAL IDEA OF THE BILL:
To amend the education law, in relation to establishing the New York
college debt repayment program.
 
SUMMARY OF SPECIFIC PROVISIONS:
Section one amends the education law by adding a new section allowing
for the creation of New York college debt repayment programs. Among
other things, the bill states that a college debt repayment program may
be established by any resident of this state, and that the earnings from
the program shall grow federally and state tax-deferred and withdrawals
for qualified expenses shall not be subject to state or federal income
tax. The bill provides definitions for the terms to be used therein and
addresses related matters.
 
JUSTIFICATION:
Upon graduation, a large percentage of college and university students
in the United States are sent out into the world with an immense finan-
cial burden. In 2024, student-loan debt stands at over $1.74 trillion.
To address this issue, this bill expands New York State's 529 College
Savings Program to pay for college debt once a student enters and leaves
an institution of higher learning. Currently, the 529 Program can be
used to save for future college expenses while attending college or
higher-education-related activities. This new proposal will allow
friends, family or the student to pay into the program after leaving
college as a way to help offset college debt.
Over the past few years, New York State has put forward new resources to
help students pay for college, and there are options available to
consolidate loans. But these are small in scale considering the needs of
more than a million students enrolled in colleges and universities
across the state each year. This accumulated debt is not only a
hindrance to students' future financial stability but also negatively
impacts the state's overall economy, as income that could be used to
stimulate economic activity is instead absorbed by banks in other states
holding New York State student debt. To address the college debt crisis,
this legislation will utilize the existing bureaucratic structures of
our state to fully assist those impacted by this problem.
According to data from Education Data Initiative, the average federal
student loan debt balance in 2024 is $37,853, and 10.3 percent of
student borrowers default on their educational loans within their first
three years of repayment. Black and Latino student borrowers are more
likely to have difficulty repaying their loans than White borrowers.
This may be explained in part by financial and academic barriers ground-
ed in structural, historic, and sometimes ongoing practices in the labor
market.
This bill authorizes the 529 Program to assist in savings plans that
will facilitate payment of college debt after leaving college. Analysis
of the 529 college Savings Program shows that few families making under
$100,000 utilize the program, indicating that many families in that
income group have not saved enough to participate in the program. While
it makes economic sense for a family to start saving for their child's
education early, it may not be feasible. Allowing the 529 Program to be
used for a longer period will give the borrower additional financial
resources to pay off their college debt while providing the tax-deferred
savings at the same time.
 
PRIOR LEGISLATIVE HISTORY:
2017-18: Referred to Higher Education
2019-20: Referred to Higher Education
2021-22: Referred to Higher Education
2023-24: Referred to Higher Education
 
FISCAL IMPLICATIONS FOR STATE AND LOCAL GOVERNMENT:
None
 
EFFECTIVE DATE:
One hundred eighty days after becoming a law.