MONTGOMERY — A bill from Rep. Danny Crawford, R-Athens, would allow the Alabama Department of Revenue to send a person’s state income tax refund to state institutions of higher education to pay outstanding debts.
Crawford told Alabama Daily News that this will help students get out of debt more quickly and help colleges and universities resolve their own debts.
“It’s sort of a win/win for the student and the institution of higher education,” Crawford said. "It doesn’t discourage further education; it would encourage it.”
House Bill 60 would add colleges and universities to a 2019 law from Sen. Tim Melson, R-Florence, that allows a number of different state agencies to collect a person’s income tax refund to resolve debts.
The Alabama Department of Human Resources, Medicaid, the Alabama Department of Labor, the court system, counties and municipalities are agencies included under Melson’s original legislation. It passed both the House and Senate with bipartisan support and very little opposition.
Crawford said his bill will help students pay off their debts faster and in the long run help with their credit rating.
“It sort of forces them into a better situation than they would be in,” Crawford said.
The debts students acquire from universities or colleges could be anything from parking tickets and library fees, to scholarships or grants that went unused because the student dropped out.
“If they got that money and they quit three or four weeks into the semester, it encourages them to take that money and pay that debt off rather than just keeping it,” Crawford said.
Athens State University is in Crawford’s district and officials there discussed the proposal with him. Chris Latham, the director of public relations and marketing for Athens State, told Alabama Daily News the university is owed about $1.3 million from students.
“The amount has increased over the past five years by about $300,000 to $400,000 and we actually saw it at an all-time high at over $1.3 million in 2017 but we’re just right under that now,” Latham said.
Latham said he didn’t know the exact reason why the amount of debt has been increasing, but Alabama’s record-low unemployment could be a contributing factor.
“As people are fully employed, they are less likely to come back to school and try to obtain a degree and it could be one of those cases where students found a job while in school and they found it too difficult to do both,” Latham said.
Latham said that since Athens State’s typical students are usually working parents, they understand the financial and time constraints that might push them to not finish their degree.
“The reason we have accounts receivable at the amounts that they are right now is because we typically serve a non-traditional student base and our average student is a 31-year-old mother who has a full-time job and family at home, so we understand the conflicts of trying to do a little bit of everything in life so we understand that side of it, too,” Latham said.
Latham said he thinks this legislation will help decrease the financial burden on those students.
“I think the students who may be in this situation, there are distinct benefits and advantages of it, the increased credit score by not having a collection agency trying to collect the funds and less money they end up owing because they don’t have those additional fees associated with that,” Latham said.
If a student has outstanding debts, then there is a hold on their account and they can’t re-enroll, and there is a block on their transcript, Latham explained.
“If their situation changes down the road and they want to continue their education, this allows them to do that,” Latham said.
Crawford said he hadn’t heard of any opposition yet to his bill.
The Treasury Offset Program is administered by the U.S. Department of Treasury’s Financial Management Service and allows federal and state government agencies to offset a person’s outstanding debts with their tax refund.
Past-due child support payments, unemployment compensation debts or state income tax obligations are common outstanding debts, according to the Internal Revenue Service.