LEXINGTON, Ky. — Mental health counselor Adam Hensley earned his bachelor’s degree in psychology from Eastern Kentucky University in 2003. While getting his master’s in 2010 from Lindsey Wilson and currently completing his Ph.D., he has been working since he graduated from EKU and is saddled with more than $176,000 in student loan debt. 

A proposal being considered by President Joe Biden would forgive up to $50,000 in federal student loan debt per borrower, which would cancel more than $8 billion in loans in Kentucky and eliminate debt for 80% of borrowers in the Bluegrass State, according to a recent analysis commissioned by the Kentucky Center for Economic Policy (KCEP). The research also shows Biden’s proposal would erase a large portion of debt for an additional 125,800 Kentucky borrowers.

Hensley, 40, has been trying to pay back his student loans since 2003. His first employer offered a student loan repayment option, but the employer charged back what had been paid when he switched jobs years later.

“I have to pay $300 per month toward that just to have my current job,” Hensley said. “It doesn’t do anything for my overall debt, and I can’t write it off. I hope that once I get my Ph.D. I will make more money than I do now and can start paying it off in chunks.”

Hensley said he has the rest of what he owes “in good shape,” and his student loans are by far his most significant expenditure, with his only other debts being about $3,000 in credit cards and his car loan. 

KYCEP supports Biden’s proposal. The analysis revealed that debt forgiveness would speed up post-pandemic economic recovery by increasing borrowers’ purchasing power, narrowing Kentucky’s racial wealth gap, and benefiting those who took loans but never received a degree. 

“Our new analysis finds that if the federal government forgives $10,000 in student loan debt, 209,400 Kentuckians, or 34% of Kentucky borrowers, will have their loans, a total of $1.09 billion, forgiven entirely; another 406,200 Kentuckians would have a portion of their student loans forgiven,” said Ashley Spalding, KCEP research director. “And, if $50,000 in student loan debt is forgiven, 489,800 Kentuckians, or 80% of Kentucky borrowers, will have their loans — a total of $8.15 billion — forgiven entirely.”

Spalding said the student debt problem has worsened in Kentucky, which follows the national trend. Household student loan debt in the United States has increased from $500 billion to more than $1.7 trillion in the past 15 years.

“A growing share of individuals and families have taken on debt as the costs of attending college have grown in part due to declining state funding for public higher educational institutions, while Pell Grant amounts — not to mention wages — have not kept pace,” Spalding said. “Scholars and advocates are calling for student debt relief as an effective policy tool for economic recovery, as well as a step toward racial equity as the rise in student debt, has had disproportionately negative effects for Black borrowers.” 

The study, titled “Student Loan Debt in the U.S. in Kentucky,” reveals around 616,000 Kentucky residents have outstanding federal student loans, which equates to roughly 18% of all Kentuckians over the age of 18. That share is slightly higher than the national percentage of borrowers. The total principal and interest balance on those loans are $20.5 billion, roughly $33,300 per borrower. Most borrowers owe less than $50,000. The median amount owed is around $18,000, while more than 125,000 Kentucky residents owe more than $50,000 in federal student loan debt. 

Spalding said Kentuckians are already doing what they can to reduce and make sustainable the burden of student loan repayment. For example, 20% of Kentucky borrowers, covering 32% of the debt, are already on income-driven repayment plans that cap the monthly payment at 10% or 15% of the borrower’s gross or discretionary income. Individuals on these repayment plans have an average balance of more than $53,000, and their payments without a cap might be quite high. For example, the monthly payment on a $53,000 loan with a 10-year term at 5% interest would be $562 per month. The data also show a large share of borrowers in Kentucky did not complete their degree or credential, making it even more challenging to afford loan payments.

“At the same time that most student loan balances in Kentucky are under $50,000, the state’s rising student loan default rates indicate repayment stress among borrowers,” Spalding said. “The share of outstanding student loan balances in default has risen steadily from just under 9% in 2013 to nearly 13% at the beginning of the pandemic. Those who attended institutions that do not offer a degree — they offer some type of credential but not a degree — or do not offer a degree beyond an associate degree, have a higher default rate.” 

The benefit of debt forgiveness for hundreds of thousands of Kentuckians would be felt across multiple demographic groups, Spalding said, particularly the commonwealth’s Black and low-income borrowers. 

“Not only are Black Kentuckians and Kentuckians with low incomes more likely to take out federal loans to go to college, but they are also more likely to struggle to repay them,” Spalding said. 

Student loan debt in Kentucky affects people of all ages, the study shows. Two-thirds of borrowers are between the ages of 25 and 49, considered prime working age. The average balance is highest for the 35 to 49 age group. There are also Kentuckians beyond or near retirement age who owe federal student loans, with an average debt of $38,000, although there are only about 20,000 such borrowers. Spalding said a significant portion of them are likely parents who borrowed to support the education of one or more children.

“The data presented in this paper points to the severity of the student debt crisis in Kentucky, and that hundreds of thousands of Kentuckians, not to mention the state’s economy, would benefit from federal student loan forgiveness proposals,” Spalding said. “In addition, such a policy would likely lead to some improvement in long-standing racial inequities in wealth. At the same time, additional investment in making public higher education more affordable is needed in Kentucky so that this problematic system isn’t perpetuated.”

Ryan Gumm, 20, is a sophomore broadcasting and electronic media major at EKU and took out his first student loan during the current academic year. 

“I was very reluctant,” Gumm said about getting the loan. “I don’t want to become dependent on student loans to get through school and be paying on them in my 50s. I worked over the summer and still had to get one. A college student can’t really work enough hours to pay for school and survive. The loans help so much now, but it was a difficult decision to get one because of the interest rate and what it means in the long run. But, at the same time, it would be impossible for me to pay for school without it.”