In total, approximately 43 million Americans owe $1.77 trillion in student loan debt. The Department of Education has not collected on defaulted loans since March 2020, a policy of the COVID-19 lockdown era, which was continually extended by the Biden administration.
That prolonged pause was lifted in early May, when the Department of Education resumed collections at the behest of the Trump administration. The shift sent borrowers scrambling to find ways to fulfill their repayments or risk wage garnishment or tax refund seizures.
Other repayment plans are up for discussion in Congress right now, with most Republicans backing the Trump administration’s plans to phase out Biden-era payment options. In turn, they are proposing a Refund Assistance Plan, under which borrowers’ monthly payments would range from 1% to 10% of their income.
While student debt repayment changes loom, other stakeholders are wondering: What if there was a different way?
For students at the University of Hawai’i Mānoa’s College of Engineering, a “renewable learning fund” has offered a new path.
Launched by Social Finance, the Hawai’i Renewable Learning Fund is a $2.5 million “revolving loan fund” that provides zero-interest loans to low-income college students to cover their remaining costs of education after grants and scholarships.
It was created with the intent to expand the engineering talent pool in Hawaii and pair graduates with local firms.
After graduation, if a student borrower earns above $50,000, they pay back their loan through fixed monthly repayments for up to five years. The Fund also partners with local employers, who help new employees with repayment assistance as a retention practice.
If borrowers earn less than that minimum salary, they can apply for an income-based deferment and have a $0 monthly obligation.
The best part? All of those repayment dollars are recycled right back into the fund to support future students through a “fixed supply” of financial aid.
“Many talented students in Hawaii face barriers to degree completion, including limited affordable student financing options and high costs of living,” Hydie Kim Hudson, the vice president of impact investments at Social Finance, said in a statement for the University of Hawai’i.
“The Hawaiʻi Renewable Learning Fund aims to address these barriers while also helping local employers hire talent for in-demand roles. We’re excited to leverage our experience designing recycling funds across the country to meet the needs of Hawaii’s students and employers.”
Similar approaches have been proposed and considered in a number of state legislatures, but high startup costs have kept them from becoming commonplace.
Charitable foundations like Social Finance are hoping to expand similar funds in other pilot programs to provide a proof of concept, especially in sectors with a high need for new talent.
The pilot program in Hawaii focused on engineering majors because the state found itself with a shortage of engineers in defense, construction, and tourism industries.
“Many of our students have to work part time jobs to make ends meet, so they take one less class each semester, which delays graduation and the start of a career,” said University of Hawai’i Mānoa’s College of Engineering Dean Brennon Morioka.
“The longer they take, the more expensive it is and the less likely it is that they will earn a degree, and meanwhile, our college is graduating about 300 engineers a year when the state needs around 500 new engineers a year.”
This makes it an easy case for local engineering firms to support the fund financially, as it provides them with a renewable well of talent from a credible educational institution.
“We are proud to be part of this transformative endeavor that lowers barriers to education and empowers our future engineers,” Michael P. Matsumoto, the president and CEO of engineering firm SSFM International, said in a statement for the university.
“This isn’t merely an investment in individual students — it’s a strategic investment in Hawaii‘s sustainable future.”
More of Social Finance’s pay-it-forward loan programs have already started or will launch in the fall in Colorado, Massachusetts, New Jersey, New York, and Florida, each focused on a field with high demand and short talent supply, like health care, cybersecurity, or climate.
Although statewide legislation on pay-it-forward loans has stalled in California, another program by Social Finance will begin in San Diego this fall, with an emphasis on behavioral health professionals.
“I think of this as a really important proof of concept,” Alex Harris, vice president of Harold KL Castle Foundation, a lead funder in the HRLF, told The Hechinger Report.
“It’s a new way of thinking about scholarship support that lets you extend your dollars.”
Already, funders are excited by their success in Hawaii and are eager to see where the approach can blossom next.
“By recycling every dollar repaid back into the Fund, we’re able to continuously support more students than we could using traditional loan or scholarship models,” Harris said in a statement for Social Finance. “With this Fund, we are supporting public education while investing in the sustainable economic development of Hawaii.”
And for the students — who are surprisingly skeptical about the concept, according to Social Finance leaders — once they opt in, they realize the potential for a renewable fund like this.
“There’s something that feels very different in saying, ‘I’m repaying a loan and it’s not going off to some abstract place but it’s going to create this opportunity for someone else,’” Kirstin Hill, the president and chief operating officer at Social Finance, told The Hechinger Report.
“And I think that matters, at least to some people.”
Melanie, a civil engineering student at the University of Hawai’i Mānoa, was one of 17 students who applied to the fund. She received the assistance she needed to finish her college career.
“Just having the boost in finances allowed me to work less hours, just so I can focus on school,” she said in a testimonial. “And once you begin your career … you don’t have to worry about the high interest rates … and it allows you to invest into the future engineers of Hawaii.”
Another student in New Jersey, Colton, said this approach has been “a real source of pride.”
“No one’s getting rich off this,” he told The Hechinger Report. “The money is going back to someone just like you. There’s really a sense of gratitude. And that’s a wonderful thing.”
Header image courtesy of University of Hawai’i Mānoa
