Does Student Debt Matter in 2016 Election?

The 2016 Presidential Candidates and the Student Debt Problem

2016 Presidential Election

In this election year, solving the student debt crisis is light on the agenda for the candidates. As of March 2016, only two candidates have outlined clearer plans to address the problem. So, the question is:

Does Student Debt Matter in the 2016 Presidential Election?

In this article, we explore the plans laid out by two candidates and briefly mention where the other candidates stand. Our intent is for you to be well informed of the facts, whether you are concerned about funding education for your child or for yourself or you just want to learn about the candidate views.

Congress led efforts for student debt

There are a couple of bipartisan and democrat led bills that are addressing part of the student debt problem. But none have succeeded. We won’t cover these here but if you are interested, leave a comment below and we can write about it.

Presidential candidate plans on student debt

A few weeks ago, we wrote about a young student trying to make ends due to her student debt and the impact of rising levels of debt.

That theme resonates with the campaigns of:

  • Hillary Clinton (Democratic Candidate)
  • Bernie Sanders (Democratic Candidate)

That is not to say the others are silent on the problem. However, we only cover actual proposals or plans to address the problem.

Up until early March, we could have added Marco Rubio (Republican candidate) to the list but he suspended his campaign. While we will not write about his now-suspended campaign plans, he is the sponsor of a couple bills on student lending that are pending presentation to the House floor.

Also, note that although John Kasich (Republican Candidate) has not mentioned a clear plan to address the problem, he does seem to have a record in his home state of Ohio where he has tackled the problem. Read more about his record below.

Current Student Debt Level (March 2016)

And here is the big number that is being tackled.

Yes, the total student debt level stood at $1.3 trillion (as of March 2016), growing at nearly $3,000 per second, according to the Federal Reserve. Moreover, graduate and professional student debt accounts for more than 40% of the debt level according to a 2014 paper published by New America.

Addressing this problem is no child’s play and there is a debate on how to fund the costs. The most contested path for funding is through increases in taxes. Some have also proposed review and the reduction of the costs incurred by institutions that will ultimately lead to reduced tuition costs.

There are questions regarding the suitability of the plans put forward. Nevertheless, here is a brief outline and premise of each plan.

Clinton - New College Compact - Student Debt Clinton (D) New College Compact Plan

Clinton’s statement during one of her campaigns sums up the premise of her plan:

“No family and student should have to borrow to pay tuition at a public college or university…. And everyone who has student debt should be able to refinance it at lower rates.”

This plan lays out an overhaul of the college education programs by addressing the cost of college and the repayment of debt.  The proposal takes from bills that have been presented but so far failed in Congress.

What does it mean for prospective students and their families?

  • No student will have to borrow to pay for tuition, books, and fees to attend a four-year public college in their state.
  • Students at community colleges will receive free tuition.
  • Students will do their part by contributing their earnings from working 10 hours a week.
  • Families will do their part by making an affordable and realistic family contribution.
  • Income-based repayment will be simple and universal so that students do not have to repay more than they can afford.
  • Loans will be forgiven after 20 years for those who consistently make payments.
  • Borrowers who are unable to repay their debt will have new repayment options and additional help to protect their credit to help them get back on their feet.
  • Students will be able to refinance their loans at lower / current federal rates (expected to be half for current borrowings).
  • Federal Government will no longer profit from student loans and therefore further help reduce rates.
  • The government will extend the American Opportunity Tax Credit (currently expected to expire in 2017), which provides up to $2,500 in tax relief for tuition and other expenses.
  • Students will be able to use federal aid for high-quality career and lifelong learning programs, such as specialization certificates, with proven records.
  • The government will enact a borrower bill of rights to ensure accurate and timely advice on repayment options.

What does it mean for the participating states?

  • States will receive rewards for ensuring that no student should graduate with debt for tuition and limit the costs for non-tuition expenses (e.g., living expenses).
  • A dedicated $25 billion fund will support modest endowment private colleges, including minority-serving institutions to help lower the cost of attendance.
  • States will have to step up and meet their obligation to invest in higher education by maintaining current levels of funding and reinvesting over time.
  • States that commit to the compact will work with colleges and universities in ensuring that all funds received are applied to instruction and learning, and improving the prospects for completion.

What does it mean for colleges and schools?

  • There will be a push to increase graduation rates by giving new grants to institutions that invest in student support, quality child care, emergency financial aid, and boost completion, especially for low-income and first-generation students.
  • Schools will be banned from receiving federal student aid if found guilty of fraudulently recruiting students.
  • The government will expand AmeriCorps from 75,000 to 250,000 members and build on the current AmeriCorps Segal education award. This will enable volunteers to attend an in-state public college or university without having to take out loans for any expenses. Students may also have their loans forgiven upon completion of their service commitment.
  • Institutions will be transparent with upfront information about graduation rates, likely earnings, likely debt, and how those metrics compare with other schools.
  • Institutions will have skin in the game by being ineligible for federal aid if they do not have a high completion rate.
  • Institutions will be accountable for improving outcomes and controlling costs to ensure tuition is affordable and students who invest in college leave with a degree.

For more on the plan for reducing the cost of college, read here.

Cost of Clinton Plan

The cost of the plan will be $350 billion over 10 years, fully paid for by closing tax loopholes and expenditures for the most fortunate.

  • Grants to States and Colleges will take up more than half of the total.
  • Around one-third of the funds will go toward relief on interest from student debt.
  • Remaining funds will support innovative new investments to create a higher education system.

Bernie Sanders - Six Step Plan - Student DebtSanders (D) Plan

Bernie Sanders has a simple six-step plan to address the student loan problem. The objective of the plan is similar to Clinton’s plan: make college tuition free and debt free.

Sanders summed his plan objective in a statement quoted by Bloomberg:

“We live in a highly competitive global economy and if our economy is to be strong, we need the best-educated workforce in the world. That will not happen if, every year, hundreds of thousands of bright young people cannot afford to go to college, and if millions more leave school deeply in debt.”

Key Steps of Sanders’ Plan

Sanders claims he will help:

  1. Make tuition free at public colleges and universities to mimic the education system in many developed countries around the world such as Germany, Finland, Norway and Sweden.
  2. Prevent the federal government from making a profit on student loans and help reduce interest rates on loans.
  3. Substantially cut interest rates by changing the formula for setting the rates. The campaign estimates that current rates will reduce by more than half.
  4. Allow all students to refinance their student loans at today’s low interest rates.
  5. Require public colleges and universities to meet 100% of the financial needs of the lowest-income students. At the same time, triple the federal work-study program to build experiences that will help their career prospects.
  6. Pay for the plan by imposing a tax of a fraction of a percent on Wall Street speculators.

You can read more about his plan here. As you can tell, the plan is light on details relative to the Clinton plan.

Cost of Sanders’ Plan

The campaign expects the plan will cost $75 billion a year and will be fully paid for with the tax increase suggested above.

Sanders’ Record on Education

Sanders has a good record on supporting education programs. To name a few key achievements and voting record:

  • In 2011, he introduced and helped pass the Foundation for Success Act to enhance early childhood care and education by providing State grants on a competitive basis to establish such programs.
  • In 2013, he voted in favor of capping interest rates on federal student loans; a bill that failed in Congress.
  • In 2014, he voted in favor of amending the Higher Education Act of 1965 to provide for refinancing of certain federal loans. Another bill that ultimately failed in Congress.
  • In 2015, he again voted in favor of a bill that would make college affordable by allowing borrowers to refinance at lower rates and offset the cost through increases in federal tax for high-income earners. Unfortunately, this bill failed to pass in Congress.

Other Presidential Candidates on Student Debt

John KasichJohn Kasich (R)

John Kasich has not proposed a plan or said much on the topic but his campaign website suggests he is calling out for an “improved system” to help keep college affordable. That said, he is probably the only candidate with a track record in addressing the issue in his own state – Ohio, where he has made the following efforts:

  • There is a new task force to help schools “identify ways to control costs”.
  • A 100 percent performance-based funding formula has been implemented where school funding is dependent upon the success of the students.
  • There is an early warning system for drop-outs to help kids stay in school and obtain diplomas.
  • There has been an expansion in vouchers for students and schools that can accept vouchers.

Ted CruzTed Cruz (R)

For Ted Cruz, student debt is not on his list of priority issues on his website and he has been light on the topic relative to others. Among his record:

  • He voted against legislation that would cap interest rates on student debt.
  • He voted against legislation that would allow borrowers to refinance their student debt.

To be fair, voting against bills does not necessarily mean he is against the cause. In this case, we do not know the reasons for Ted Cruz voting against the bills, particularly since we have not seen a proposal from his campaign yet.

Donald J TrumpDonald Trump (R)

Donald Trump believes the Federal Government should not make a profit on student loans but has not put forth any plan to addressing the problem. That is the only clear statement available from him on the topic. Since he is not a Senator or a Representative, his record outside of Congress has two noteworthy points:

  • He created Trump University, a for-profit organization. The State of New York is suing it for engaging in “deception at every stage of consumers’ advancement through costly programs”.
  • He suggested in one of the Republican debates that Ben Carson would be his Education “guy”. As a reminder, Ben Carson believes that the student loan crisis is due to students not being able to understand the “importance of work” and not using “their brains”.

So who is best suited for addressing the student debt problem?

That is the trillion-dollar question. And one that is difficult to answer. Talk and plans are good for campaigning. Ultimately, we need Congress to pass bills. With ‘political ambitions first’ attitude in Congress, sadly nothing gets done. It is difficult to say who is best suited to make good on their promises (if they are making promises), but there seems to be more thought on the Democratic side than on the Republican side. 

So far, only the Democrats have laid out their plans or proposals and have presented more bills to Congress compared to the Republicans. While that is not to say that the Republicans are silent or do not care, there seems to be no room for compromise.

The key problem with the proposals is funding. Congress will likely reject any tax increases or cuts across other federal programs but we are unsure how else one can tackle such an existing crisis. The issue is two-fold: existing debt level is high and cost of education is increasing. Reducing waste or fraud and managing costs will help reduce the cost of education but the current problem is in need of urgent attention.

What can we do to help?

We have been at the mercy of politics when it comes to education. We understand that this is no small issue but even small steps to improve the lives of thousands of students and graduates are important beginnings. So, we need to do our part and take charge of the issue. Here are some definite things you can do:

  • Call or write to your local representatives and keep the pressure on. Get involved by telling them to vote for proposals. Make your voice heard. At the same time, tell them you are open for compromises as long they take steps to improve the future of students. Threatening to take away votes is precisely the reason why politicians do not compromise out of fear of losing their seat.
  • Vote. While promises often get broken, the chances of success are relatively higher with a President who proposed a deal versus one that did not even make a promise. Do your homework and understand the plans and proposals. Check the prior record of the candidates on education and look for reasons why they voted for or against any bill.
  • Do your homework. Getting into a college or university or field of your choice is not easy. However, you can still be wise if your options are limited. Research your career prospects after graduation, the debt you will likely incur and consider how you intend to repay the debt back.

That sums up the Presidential Candidates’ current proposals on student debt crisis. As the election platform is going to change significantly over the course of the next few months, we may see more on the topic or a change in course by the others. We will provide an update if there is one. We hope we were able to provide some insight into the Presidential candidates’ plans and positions that you found useful.

If we have missed any information from the profiles above or if you have any questions, please do let us know through the comment section below. We would like to get your feedback and thoughts and answer any questions you may have. 

 

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2 thoughts on “Does Student Debt Matter in 2016 Election?

  1. Its a shame that cost of education is going up but politicians are not doing anything about it. As a parent of 2 high school kids, I am concerned about paying for their schools. i know of many parents who are helping pay the loans for their children. Often people don’t realize that when they talk about student debt. Yet there is no relief even for parents who work hard and are paying for sending kids to school. I don’t know how we will get through it. Even if Hillary wins, it’s not a priority for her and it will take a lot for her plan to pass congress. It is just sad where this country is heading.

    1. Hi Susan,

      I certainly feel for your situation. Sorry we didn’t mention the burden on parents in this or previous posts but you are right – it needs to be mentioned and addressed.

      While it doesn’t answer your question/concern, I know that parents who have taken out Federal Parent Plus loans are not eligible yet for income based repayment plans but may be eligible for income contingent repayment plans.

      Let me research what changes may be upcoming in form of help to the parents and I can share that with you and/or write another post on how you can prepare for future college needs.

      Thanks so much for your thoughts. I hope we can share some insight with you that may help ease your concern even if a little bit.

      George

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