Colleges tap into stimulus funds to wipe unpaid fees for low-income students

Young is among thousands of students whose colleges and universities have wiped their student account balance in recent months. Using pandemic stimulus money, nearly two dozen schools across the country are forgiving fees for things like extra courses, parking tickets, lost library books and, in some cases, tuition. On Wednesday, New York Governor Andrew Cuomo announced what will be the largest of these programs, erasing $125 million in unpaid tuition and fees for students in the City University of New York system. 

Students can get to graduation owing a range of fees that, in some cases, can exceed $10,000. By comparison, those who finished college at either public or nonprofit schools in 2019 and took out loans, left with an average of almost $29,000 in debt, according to The Institute for College Access and Success. Students who drop out of school because of unpaid balances suffer the worst of all worlds: No degree and student loan payments over their head.

Young said she almost didn’t believe the email from Trinity on July 22 announcing its balance-clearing program. The small Catholic university used $2.3 million of its approximately $11 million in federal stimulus money to rid students of fees they owed to the college. On average, the balance payout came out to $4,583.

“I just thought ‘am I seeing this right am I seeing this right?’” Young said. “I just want to make sure that it’s not a scam.”

There are rules around how schools can use their stimulus funds, but the government “strongly encourages” schools to help alleviate money students owe directly to the schools, according to the Department of Education. The government allows colleges to erase student balances either by characterizing it as lost revenue and reimbursing themselves, or using the funds as an additional emergency grant to students, according to an FAQ document from the department. 

These balances can amount to huge barriers to staying enrolled in school for many low-income students, who may take one or two jobs to afford school. Some institutions prevent students with even small outstanding fees from registering for classes, requesting transcripts or, in extreme cases, from graduating.

Unlike loans, which are often held by private companies or the federal government, students owe fees directly to their college or university. According to Trinity President Patricia McGuire, about 2,000 students—roughly equivalent to the college’s total enrollment—have dropped out in the past decade because of financial challenges, including holds on their accounts from overdue balances.

The Biden administration, as part of the American Rescue Plan, asked colleges and universities to use part of their $152 billion in COVID-19 relief funding to erase unpaid fees. Biden had promised to cancel some student debts while campaigning for president. After pressure from Democratic Senators Chuck Schumer and Elizabeth Warren to wipe out up to $50,000 per student, the president said he would have the Department of Justice look into it. House Speaker Nancy Pelosi, has questioned whether he has the power to do so. 

Meanwhile, millions of borrowers have had their payments frozen during the pandemic. That will expire come October. 

Steven Newton, a spokesperson for Delaware State University, said administrators estimated that the school has likely lost more students over the years because of fees than loans. Administrators can figure out ways to put together tuition packages, he said, but students have to pay fines owed to the university themselves. A combination of stimulus dollars and private fund-raising allowed DESU to zero roughly 500 students’ balances, covering the classes of 2020 and 2021.

The average debt cleared was $3,318, and some students owed as little as $100, Newton said. Still, even small debts can cast a long shadow.

“It makes it more cumbersome for them to get transcripts. It makes it more difficult to start their careers, to rent apartments,” Newton said. “When you’re starting out and you’re 22 years old, $3,300 in debt can be a huge amount.”

But federal funding isn’t a permanent fix. After relief money dries up, fees will continue to force some students to drop out, carrying unpaid bills instead of a diploma.

When Trinity students drop out because of unpaid balances, McGuire said they’re likely done with school for good. Around 70% of the student population qualifies for Pell Grants and the median family income is $25,000.

Making education affordable, whether by getting rid of fees or forgiving loans, is like “climbing a mountain,” McGuire said. 

She added that she hopes balance forgiveness will show the benefits of putting money in students’ hands. 

“We’re not talking about giving an advantage to rich kids,” she said. “A little bit more money for low-income students can make them academically and economically successful and that would be good for this country. That’s a win-win.”

—With assistance from Janet Lorin.