How the presidential candidates would tackle student debt

When Donald Trump decried the profits the federal government makes on student loans and described students “swimming” in loan debt last month, his perspective closely mirrored that of one of his fiercest critics, Sen. Elizabeth Warren (D) of Massachusetts.

In a speech last September, Senator Warren assailed the “$66 billion in profits” the government made from federal loans issued between 2007 and 2012 – a sum she has called "obscene."

Whether the student loan program makes a profit or loses money is part of a debate over how the program’s costs are calculated. But some say the increasing political rhetoric – whether calling student debt a “crisis” or pushing for colleges to have more “skin in the game” in how much debt students take on – can obscure other issues. 

At approximately $1.3 trillion, student debt has exceeded credit card debt and impacts about 43 million Americans, sparking a variety of efforts to aid students struggling to afford college. While some concerns have focused on the role of declining state funding in driving up tuition costs, the presidential campaign has particularly emphasized what Democratic nominee Hillary Clinton has called the “crushing burden" of debt.

What Clinton would do

“My concern is the language of ‘debt is a crisis’ may scare some people away from borrowing fairly modest amounts of money to college and get a good return on their investment,” says Robert Kelchen, an assistant professor of higher education at Seton Hall University.

“I don’t necessarily want people going and taking out $100,000 in debt, but if you take out $25 or $35,000 and finish a bachelor’s degree, odds are, you’re in better shape than if you did not go to college,” he tells The Christian Science Monitor.

A provision in Mrs. Clinton’s plan to provide tuition-free education at public colleges and universities for students whose families make under $125,000 a year has sparked the most debate.

But when she originally rejected a more expansive plan by Democratic rival Sen. Bernie Sanders (I) of Vermont, Clinton invoked a long-running argument about who should shoulder the costs.

“I disagree with free college for everybody. I don’t think taxpayers should be paying to send Donald Trump’s kids to college,” she said at a Democratic debate in November 2015.

But some researchers have argued that some provisions in Clinton’s plan will not have as much impact on how students pay for college as she claims. One example is her platform's promise to "significantly cut interest rates so the government never profits from college student loans."

"Cutting interest rates on student loans won't get more students into college, and siphons off revenue from the grants than can do this important job," writes Susan Dynarski, a professor of public policy, economics, and education at the University of Michigan, in a Brookings Institution paper.

Dr. Dynarski found that the ten-year monthly payment for a $20,000 loan at an interest rate of 4.29 percent – the current rate for a commonly used federal program for undergraduate students – drops only $20 when the rate is cut to 2 percent: from $204 to $184.

Trump's plan: a return to an older model?

Mr. Trump’s own plan, as detailed so far in comments made by advisor Sam Clovis to Inside Higher Education in May, also tackles issues of accountability in paying for college, but in a different fashion.

The plan would give more oversight to colleges to decide whether to grant loans to a student based on their prospective major and future earnings, Dr. Clovis, a professor at Morningside College in Iowa who now serves as the campaign’s policy director, told Inside Higher Ed.

"If you are going to study 16th-century French art, more power to you. I support the arts," he said. "But you are not going to get a job."

The campaign's plan would also give private banks oversight over government-backed student loans – reversing a 2010 decision under President Obama to make the federal government the lender.

But some researchers say such efforts can defeat the purpose of providing government aid for students hoping to attend college in the first place.

“It is especially important that any student be able to receive loans regardless of their academic record and their choice of studies,” wrote Sara Goldrick-Rab, a professor of higher education policy who now teaches at Temple University, in a Wall Street Journal column in February.

“Doing otherwise puts lenders in the position of picking winners and losers, and determining destinies for young people who, like all of us, deserve a shot at the American dream.”

Trump has said he will unveil more details about the plan in coming weeks, and his campaign didn’t respond to a request for comment from The Christian Science Monitor.

Questions about the loan program – its costs, its possible burdens for taxpayers, and how they are calculated – has been a central concern for some critics.

Dr. Kelchen of Seton Hall traces that debate back to comments by William Bennett, President Ronald Reagan’s secretary of Education, who argued that the availability of federal aid had led to skyrocketing college prices.

“If anything, increases in financial aid in recent years have enabled colleges and universities blithely to raise their tuitions, confident that Federal loan subsidies would help cushion the increase,” Mr. Bennett wrote in a New York Times op-ed in 1987.

A need for more transparency

Another area that could use further reform, Kelchen says, is informing students about the availability of income-based repayment plans, which aim to help students by capping their monthly payments at a percentage of their incomes.

The Education Department found earlier this year that 43 percent of the roughly 22 million Americans with federal student loans were either behind or had received permission to postpone payments because of economic hardship.

There is also a substantial racial gap in who holds student debt. Some 54 percent of young African-American households (aged 25 to 40) have student debt, compared to 39 percent of young white households, a study by the think tank Demos found.

Some advocacy groups have also pushed for further transparency in how the Education Department collects debts from borrowers. In March, the American Civil Liberties Union and the National Consumer Law Center sued the department, seeking to learn more about how debt collection practices could impact borrowers of color.

Kelchen says that moving forward, those concerns about aiding borrowers in paying their student loans should take precedence over concerns about how much profit the program generates – or if it does.

“It’s a very politically hot topic, with both Clinton and Trump expressing concerns about the federal government profiting off loans,” he says. “But even if they are, and I’m very skeptical that they are, it’s a fairly small number. I think more of the focus needs to be on helping borrowers who are unable to repay their current loans.”