Senate committee hears bill to boost state funding for student loan counseling

Senator Moon Rebaiting told the Minnesota Senate Committee on Higher Education on March 13 that Senate File 16-11 would increase the Office of Higher Education grant for student loan repayment counseling to $250,000 per year, up from the current $200,000 appropriation.

The measure would direct the extra funding to the Office of Higher Education’s existing grant program, which has awarded contracts through a competitive request-for-proposals process to Lutheran Social Services of Minnesota (LSS). "LSS Financial Counseling has been around for 35 years," Becky Bakarian, senior director of financial and employment services at Lutheran Social Services of Minnesota, told the committee. "After meeting with a student loan repayment counselor, borrowers have a better understanding of their student loans and how to address them."

Bakarian said LSS has counseled 4,755 borrowers and held 7,238 appointments under the grant since March 2020, and that in 2024 it served 1,104 borrowers across 58 counties. She told the committee that counseling outcomes from the program include increased borrower knowledge and reductions in default risk: "93 percent report increased knowledge," she said, and "95 percent avoid default for at least one year after receiving the counseling." The bill’s sponsor estimated the $100,000 increase would allow the grantee to serve roughly 500 additional borrowers statewide.

Committee members questioned program capacity and funding sources. Bakarian said the counseling is specialized and certified, and that LSS receives multiple, earmarked funding streams to support different counseling work: "We have funding that comes in from HUD and for it’s called HECAC funding specifically from the state to provide housing counseling," she said, adding that other state funding supports student loan counseling and that those pots are earmarked. Bakarian also said the grant-supported work represents only a portion of counselor FTEs: eight counselors are student-loan certified, and the grant funds about 2.25 full-time equivalent positions dedicated to the program.

Senator Moon Rebaiting and witnesses emphasized federal-level changes that have complicated repayment paths, and said state-funded counseling helps borrowers choose appropriate repayment plans and avoid the long-term financial consequences of delinquency. The committee held Senate File 16-11 over for possible inclusion in omnibus legislation.

Details that were stated to the committee and documented in testimony include the current appropriation ($200,000 per year), the proposed appropriation ($250,000 per year), program outputs (4,755 borrowers counseled since March 2020; 7,238 appointments), 2024 service counts (1,104 borrowers in 58 counties), and reported outcomes cited by the grantee (93% reported increased knowledge; 95% avoided default for at least one year; 58% reported payments more affordable after one year; 97% developed an individualized spending plan). The committee did not vote by roll call on the bill; the committee chair announced it would be held over for possible inclusion.