At least one in five Philadelphians was already in financial distress, before the economic effects of COVID-19
Harrisburg, PA - Pennsylvania Treasurer Joe Torsella today issued the following statement, in response to a new study released by the Federal Reserve Bank of Philadelphia which found severe levels of financial distress caused by student loan debt for borrowers in Philadelphia:
“What the Federal Reserve Bank of Philadelphia revealed in their study should startle everyone who cares about our long-term economic health. Right now, so many of us are concerned with how to be safe, and how to safely re-open our economy so that we can get people back to work.
But there were significant problems in our economy before the pandemic, and there is a future that will come after the pandemic abates. We’ve known that for years, Pennsylvania is among the very worst in terms of student debt per graduate. From this study, we learned that 1 in 5 Philadelphians with student loan debt were in financial distress before the pandemic hit.
Let’s be clear about what that means. We have people in school now, who are borrowing to cover sky-high tuitions and racking up debt they may never be able to repay. We have graduates or folks with some schooling that are being dragged into financial distress by the debt they’re carrying. Many of them have gotten the jobs that the degrees are supposed to help them obtain, and the salary from the job can’t cover the debt burden of the degree that got them there.
Although the reasons appear complex, the Federal Reserve paper finds that only the wealthiest Philadelphia neighborhoods see higher education financing working as intended. In all of Philadelphia, it’s only the wealthiest neighborhoods where we a majority of student loans borrowers both current and paying their down their debt as scheduled. As a statewide elected official and long-time champion of higher education as a path to the middle-class, this tells me we need to step back and ask hard questions about the affordability, fairness, and outcomes of our system.
This study is focused on Philadelphia, but we know that it’s telling a story about all of us. The student debt crisis is a result of policies that came before the pandemic. As we come out of it, we aren’t forced to make those same mistakes. We need to come together to find new solutions that help us build a better future for our Commonwealth and our family within it.”
Pennsylvania State Treasurer, Joe Torsella
Torsella administers the PA 529 College and Career Savings Program. Families have two savings options to choose from: the Guaranteed Savings Plan and the Investment Plan. Between the two plans, the PA 529 College and Career Savings Program has more than $5.2 billion in assets saved in nearly 250,000 accounts. Torsella also serves as chair of the Tuition Account Program Advisory Board.
Under Torsella’s leadership, the Keystone Scholars program was signed into law in 2018, which provides a $100 starter deposit to a PA 529 account for every child born or adopted in Pennsylvania.
In 2019, the PA 529 Investment Plan received, for the first time in its history, a Morningstar Bronze Rating in its review of Top 529 College Savings Plans. This ranking puts the Pennsylvania plan among an elite group of 30 “Best in Class” plans, less than half of all the plans rated by Morningstar.