Debt-free college, a Democratic unifying principle

As it became clear the Democrats would nominate Hillary Clinton for the office of president of the United States, the first woman to be so nominated by one of the major political parties in this nation’s history, Senator Bernie Sanders, who ran against Ms Clinton in the primary elections and wooed her to the left on college debt, made a pitch for one of his most popular ideas.

Debt-free college unifies Democrats
(DonkeyHotey via Flickr/Creative Commons)

“During the primary campaign, Secretary Clinton and I both focused on this issue but with somewhat different approaches,” he said in a prime-time speech on the first night of the convention in Philadelphia. “Recently, however, we have come together on a proposal that will revolutionize higher education in America”:

It will guarantee that the children of any family in this country with an annual income of $125,000 a year or less—83 percent of our population—will be able to go to a public college or university tuition-free.

A few specifics

Details of how the government would pay the tuition expenses for so many students at so many state-funded colleges and universities remain fuzzy, especially as we have to assume Mr Sanders’s original plan of taxing certain transactions on financial markets was scrapped in order to craft a compromise deal with Ms Clinton.

The plan Ms Clinton is putting forward, though, looks promising. Because education is so important to success (and our future as a nation), “any serious plan for America’s future must include a bold plan to put quality education—including college—within everyone’s reach, no matter how much money they have,” she writes.

First, she plans to relieve college graduates of some of the burdens imposed by crushing student-loan debt. Just like borrowers of car loans can refinance, college tuition debt should be eligible for refinance, which would save a typical borrower, she estimates, about $2,000 over the life of the loan.

Second, she is proposing a payroll portal, which will help employers who help pay down student debt and their young employees by simplifying the repayment process and possibly finding other strategies that will encourage more of the public-private sharing of college debt that Mr Sanders brought to the surface during the primary campaign.

For students now attending college and for those who will attend college in the future, we find much bigger ideas than those proposed for easing existing debt. She plans to

  • “Eliminate college tuition for working families. Families with income up to $125,000 will pay no tuition at in-state public colleges and universities …
  • “Help students deal with all of the costs of attending college. Hillary Clinton will protect Pell Grant funding to help low- and middle-income students pay non-tuition expenses, and she will restore year-round Pell Grant funding so that students have the necessary support they need to take summer classes and meet their goal of completing college. …”

A small point of clarification: The $125,000 would apply by 2021 under Ms Clinton’s plan; it would start at $85,000 and work its way up. Also, any new plan would require substantial contributions from states and some from private business owners in order to have the full force Mr Sanders envisioned, but her plan has received widespread acknowledgment, including a tweet from Mr Sanders:

“Let me be very clear. This proposal, when implemented, will revolutionize the funding of higher education in America, improve the economic future of our country and make life immediately better for tens of millions of people stuck with high levels of student debt,” Mr Sanders wrote in a statement about Ms Clinton’s proposal.

Would it work?

Maybe, but the “revolution” would bring many changes. Although some college financing experts say the proposal was a ploy to encourage Mr Sanders’s supporters to throw their support behind Ms Clinton before the convention, they compare Ms Clinton’s new expansive proposal to the one she put forth during the campaign, which would have cost about $350 billion.

The campaign hasn’t really said how much this more expensive and expansive proposal would cost, but Ms Clinton plans to pay for it “through closing additional high-income tax loopholes—focusing on loopholes available especially to Wall Street money managers, like hedge funds and private equity firms.”

I’m skeptical about the government’s ability to raise money by changing how certain laws are enforced. Wall Street money managers might adapt to any new enforcement tactics by the executive, vaporizing the money and putting us deeper into debt.

“It doesn’t seem like any of this is going to happen any time soon,” Inside Higher Ed quoted Robert Kelchen, an assistant professor of higher education at Seton Hall University, as saying.

Even if the government could raise the money Ms Clinton’s plan would need, making college affordable would almost certainly increase the demand for in-state public colleges and universities. Prices tend to increase for goods and services as demand increases, so keeping the program level would likely require investment from states, whose budgets are still recovering, slowly, from the Great Recession, and some effort from colleges to keep tuition under control despite upward pressure on prices from the increasing demand.

“There isn’t unlimited capacity in the public sector,” the BBC quoted Barmak Nassirian, director of policy analysis at the American Association of State Colleges and Universities, as saying. “The capacity issue is a very serious one. The assumption has to be that the demand for public institutions would expand if they were free or significantly more affordable than they are today.”

People who bring up how some European countries offer free college tuition fail to mention the already-higher demand on US colleges and universities. For example, in Norway, which offers free college tuition, there are only 255,000 students enrolled in higher education. In Germany, only 2.5 million students are enrolled in higher education. The US currently has 20 million students enrolled at colleges and universities, and their tuition is still pretty high.

In fact, only Finland has a percentage of its population enrolled in tertiary education as high as that of the US, according to the World Bank, but the World Bank includes some technical schools as “tertiary” and defines the term broadly.

The new proposal from the Democrats, at least, targets low-income families, which is not as “indiscriminate” as Mr Sanders’s original plan of free college for all would have been.

Getting students to work 10 hours a week in public-service roles, required under Ms Clinton’s proposal, might be another neat trick, though, perhaps as unreachable as getting tax collectors to close loopholes for Wall Street money managers. Then there’s the need to get state-run colleges to get their costs under control. And the list goes on.

US_strudent_loan_debt_2012

Possible? Yes. Likely? No. Real? Stranger things happen.

As of the fourth quarter 2012, however, student debt is north of $1.2 trillion and growing. All the pieces need to come together in order to yield what is an obvious solution and a creative commitment on the part of a national government.

About the Author

Paul Katula
Paul Katula is the executive editor of the Voxitatis Research Foundation, which publishes this blog. For more information, see the About page.