How to Help Debt-Laden Grads Get Affordable Healthcare Coverage

As graduates entered a job market stalled by the pandemic, the United Hospital Fund recommended that the state of New York begin offering tax credits toward health insurance premiums linked to student debt payments.

“This modest program targeted at New Yorkers with student loan debt would send a strong message in difficult and uncertain times, helping young borrowers stay current with their insurance payments and stay healthy by enrolling in coverage,” said Peter Newell, director of United Hospital Fund’s Health Insurance Project and author of the report.

As unemployment soared due to the pandemic, new graduates with little job experience faced an immense challenge getting a foothold in the job market. Many of these young adults were also saddled with high student debt payments, particularly in New York. The state had the sixth highest amount of student loan debt nationwide in 2019.

With these financial odds stacked against them, it is little wonder that a sizable portion of New York’s uninsured population falls between 19 and 34 years of age. Student loan debts absorb funds that could be put toward health insurance premiums, the report argued.

Part of the problem is that the Affordable Care Act tax credit eligibility in New York currently is based on income, excluding other financial factors such as student loan debt.

This means that graduates’ incomes may set them outside of the parameters of tax credit eligibility, but they may have trouble affording healthcare coverage because much of their salaries go toward paying off student debt.

To combat this trend, United Health Fund recommended that the state attach tax credit eligibility to student loan payments, so that graduates would receive lower premiums as they paid off their student debt.

United Hospital Fund collected data on a couple of New York universities’ average monthly debt for a wide range of programs, including Bachelor of Arts in Visual Arts and Master of Public Health, as well as the typical annual income. The organization also calculated the current healthcare premium.

Then, United Hospital Fund imposed the kind of cap that might be implemented if tax credit eligibility calculations accounted for student loan payments.

The actual amount that students would save through a tax credit would vary based on their income and monthly loan payments. Still, students across the income spectrum could benefit from the program, the study found.

Students that would benefit most from this program would likely be former graduate students whose incomes exceed the 400 percent federal poverty level limit for premium subsidies but who also have higher monthly debt payments.

Former graduate students who have a midrange salary but high debt, such as that accrued from education at a private institution, would also see significant reductions in premium payments.

Students with low loan payments and low salaries would receive a lower cap but would still benefit from the program, the United Hospital Fund found.

The state would have to decide whether to set a maximum subsidy and whether to target certain demographics. The United Hospital Fund pointed out that 45 percent of those with student debt in the state are between 18 and 34 years of age, which suggests that it might be wise to restrict the subsidy eligibility to that population.

“A targeted approach to young adults starting out their careers—a valuable addition to the individual market risk pool—would also address some of the imbalance created by New York’s pure community rating system, which does not allow premium variations based on age,” the organization noted.

Affordable Care Act policies that determine eligibility have caused challenges in other ways as well. Including premium tax credits and stimulus money as income can make beneficiaries ineligible for Medicaid, a Kaiser Family Foundation study found.

The ties between financial and physical health have been a subject of conversation since long before the pandemic disrupted both the economy and the healthcare industry.

Employees have voiced their desire for employers to start better attending to employee financial health.

Nearly a third of employees were in favor of employer-provided financial health support, according to a National Business Group on Health study. But less than thirty percent of employees reported that their employees support them in financial health areas including student loan debt.

Thus, as in many other areas of society, the coronavirus pandemic is only underscoring a problem the employers, policymakers, and the healthcare industry already knew existed regarding the link between student loan debt and health or healthcare coverage. What remains to be seen is if and how the system will evolve to meet these needs.