Tuition-Free College and Student Loan Debt Crisis

Do Democrats understand the crisis?

info graphic showing 2020 candidates stance on college for all

The crisis of student loan debt and rising higher education costs is unprecedented in our country’s history.  As long as the U.S. government continues to capitulate on making radical reform across the board, the problem will continue to exacerbate itself.

College for All (C4A) is proposed as a solution to ensure that those who qualify for college can attend regardless of their income level. It acts as a form of a jobs program by promoting an educated workforce, which leads to a stronger economy. Wiping all student loan debt is another solution offered to help students who incurred debt that is holding them back from contributing to the economy. In fact, these two solutions must go hand in hand to fully address the crisis.

We compared the leading 2020 Democratic U.S. Presidential candidates on their positions regarding College for All, canceling existing student loan debt, and addressing for-profit colleges. While the election is over, their influence in politics no doubt remains.

QUICK FACTS

  1. The student loan debt crisis began skyrocketing in 2008 and is keeping a generation of people from buying homes, starting businesses, retiring, and investing in the U.S. economy. (click here for more information)
  2. There are two solutions that are proven to help students, families, and the U.S. economy: College For All and eliminating student debt. While federal student loan relief is available, it is not sufficient to address this crisis. (click here for more information)
  3. 2020 presidential candidates were compared on their positions for College for All (C4A), eliminating existing student loan debt, and addressing for-profit colleges. While the candidates are far-flung in their positions, Sen. Bernie Sanders is the only one who strongly supports all three solutions. There are other candidates who would leave students better off than they are now and have strong, notable plans. However, there are two candidates who would likely leave our families and the U.S. economy worse off: Buttigieg and Harris. (click here for more information)

LEARN MORE

The student loan debt crisis began skyrocketing in 2008 and is keeping a generation of people from buying homes, starting businesses, retiring, and investing in the U.S. economy.

  • Education costs and student loan debt began increasing in the 1970s. In 2008 it spun out of control, coinciding with the Great Recession.
    • Cost comparisons of higher education in the United States since 1970, adjusted for inflation, versus average wages and housing affordability over the same period–
      • As shown in the graph below, the costs of higher education are significantly outpacing that of median income. However, prior to 2007-2008, costs were relatively in line with wages: Higher education cost vs. median income.
      • In 1971 the tuition, fees, room, and board per year for a public 4-year college was $8,734 in Dec. 2017 dollars ($1,410 unadjusted). By 2016 the cost had risen to $20,967 per year in Dec. 2017 dollars ($20,150 unadjusted), a 140.1% increase.
      • The median income in 1971 for men was $42,757 in Dec. 2017 dollars ($6,903 unadjusted) and for women it was $14,915 ($2,408 unadjusted), making public college costs 20.4% of men’s median income and 73.7% of women’s median income per year.
      • In 2016, the median income for men was $40,445 in Dec. 2017 dollars ($38,869 unadjusted) and $25,901 ($24,892 unadjusted) for women, making public college costs 51.8% of men’s median income and 80.9% of women’s median income per year.
      • In 1970, the median existing price for buying a house was $152,030 ($23,000 unadjusted), compared to a 2019 median existing price of $283,600. That’s an 86.5% increase in median existing price 1970-2019.
  • This crisis coincides with the Great Recession of 2008 when the financial markets collapsed. Student debt surpassed $1.5 trillion at the end of 2008, up from $671 billion at the start of 2008. The Great Recession exacerbated the crisis by causing more demand for loans and for people to pursue higher education.
    • For-profit college enrollment: “The recession pushed workers to retrain for new jobs, but community colleges, where many students have traditionally enrolled during economic downturns to gain more skills …” However, public education “couldn’t handle the increased demand due to state funding cuts,” therefore the “[f]or-profit colleges stepped in to fill the void.”
    • For-profit colleges used controversial “marketing tactics to lure students like Newmeyer who were hoping for a better life. They advertised high graduation and job placement rates, which in some cases were later found to be fabricated…”
    • For-profit colleges are more expensive than public colleges, leaving graduates struggling to find well-paying jobs, further exacerbating their debt.
  • The student loan debt crisis is impacting people’s ability to prosper and is negatively affecting the U.S. economy by preventing people from being able to buy a house, pursue a career, start a family, take a vacation, etc.
    • Borrowers are buried in debt:
      • Approximately 1 in 6 Americans are burdened by student loan debt. The total amount owed to the U.S. government is nearly $1.5 trillion.
      • As of 2018, “45% of students that graduated [college] … have student debt.” 
      • “Nearly nine of 10 student loan borrowers are struggling to make payments. One in five borrowers report they cannot make the next loan payment, and 44% say it would be a struggle.”
      • “One in three of the borrowers report their student loan bill is higher than their rent or mortgage bill, with 65% saying their monthly student loan bill is more than their food budget for the month.”
      • “Student debt is an enormous burden; not just for young Americans, but the American economy as a whole. It has surpassed both credit card and automobile debt to become the second highest source of consumer debt – being beaten out only by mortgage loans.”
      • “Tuition and fees at public and private schools rose at roughly three times the rate of inflation between 2007 and 2018…”
      • The New York Fed published a report in 2015 which notes that “[a]verage sticker-price tuition rose 46% in constant 2012 dollars between 2001 and 2012 …” as shown in the chart below.
  • “Overwhelming debt prevented 80% of borrowers from saving for retirement, 56% from buying a home, 42% from buying a car, and 50% from contributing to charity, according to the report. More than 85% said student loan debt was a major source of stress, and one in three said such debt is the biggest stress in their lives.”
    • 31% of borrowers are delaying home ownership due to student loan debt, that being a leading reason for millennials as compared to boomers, where only 15% ever delayed home buying due to student loans.
  • Borrowers are put off from starting a business: “Nearly 40% of borrowers report they have been unable to achieve their career goals. As for becoming their own bosses, 28% said their student debt prevented them from starting a business.”
  • “Your student loans can affect your debt to income ratio. This is the ratio that determines how much your income is taken up by debt payments. Lenders will look at this to determine if you qualify for a car loan or for a mortgage.”
  • “58% of borrowers have taken a hit to their credit, with 10% failing a credit check for a job interview and 13% failing a credit check for an apartment.”

There are two solutions that are proven to help students, families, and the U.S. economy: College For All and eliminating student debt. While federal student loan relief is available, it is not sufficient to address this crisis.

  • College for all (C4A) is a solution that can be viewed as a form of a “jobs program.” Investing in an educated workforce leads to an all-around uplift of the greater and local economies. Bernie Sanders, 2020 Democratic Candidate and Vermont Senator, is the champion of College for All (C4A), drafting the legislation (S. 1947) for the College For All Act that would also eliminate all student debt.
    • “Under the College for All Act, the federal government would cover 67% of the cost of eliminating tuition and fees at public colleges and universities and tribal institutions of higher education. States and tribes would be responsible for eliminating the remaining 33% of the costs.”
    • The C4A Act “would provide at least $48 billion per year to states and tribes to eliminate undergraduate tuition and fees at public colleges, universities, and institutions of higher education. 
    • Under this bill, students from any family would be able to attend a public four-year college or university, or four-year tribal college or university, tuition- and fee-free.
    • All students, regardless of income, would also be able to attend community colleges, trade schools. or apprenticeship programs tuition- and fee-free.”
    • Cancels all $1.6 trillion of student loan debt for 45 million Americans within six months.
      • Canceling $1.4 trillion in student debt would have major benefits for the economy.
        • Boost GDP: Cancelling $1.4 trillion in student loan debt for the 44 million Americans who carry it could boost GDP between $860 billion and $1.08 trillion over 10 years following the debt cancellation.
        • Lower unemployment rate: The positive effect debt cancellation has on GDP would also have an impact on unemployment and job creation and could add between 1.2 million and 1.5 million jobs per year.
    • Caps student loan interest rates at 1.88 percent, preventing the Federal government profiting from student loan programs.
    • Eliminates or reduces tuition and fees for low-income students at private colleges and universities that serve historically underrepresented minorities”
    • Under this proposal, the loan holders on average would save about $3,000 a year.
    • Overall the economy would get a boost of approximately $1 trillion over 10 years.
    • “Over the course of a lifetime, the average bachelor’s degree holder will funnel $278,000 more into local economies, and contribute $44,000 more in local and state taxes. 
    • “Earning a four-year degree boasts a personal benefit of nearly 84 percent more than those with only a high school diploma.”
  • Federal student loan relief does come in many forms (forbearance, cancellation, forgiveness, and discharge), but is not serving as a solution to this crisis. Bankruptcy used to be an option for people to discharge their student debt; however, Joe Biden was instrumental in eliminating that as a concession to Republicans.
    • Borrowers have the options of forbearance, and rarely cancellation and forgiveness. While forbearance merely postpones the repayment, and cancellation is only offered in limited circumstances, of the 49,669 applications, only 206 have been forgiven.
    • “You must repay your loans even if you don’t complete your education, can’t find a job related to your program of study, or are unhappy with the education you paid for with your loan. You also can’t claim that you have no responsibility for repaying your loan because you were a minor (under the age of 18) when you signed your promissory note or received the loan. However, certain circumstances might lead to your loans being forgiven, canceled, or discharged.”
    • “The terms forgiveness, cancellation, and discharge mean the same thing, but they’re used in different ways. If you’re no longer required to make payments on your loans due to your job, this is generally called forgiveness or cancellation. If you’re no longer required to make payments on your loans due to other circumstances, such as a total and permanent disability or the closure of the school where you received your loans, this is generally called discharge.”
    • As of September 30, 2018, there were 890,516 eligible applicants for forgiveness of their loans. 41,221 applied and 423 were approved. This means that 1 percent of applicants were approved.
    • Forgiveness is offered if you make on-time monthly payments for 25 years and can be done in 10 years if one works in public service.
    • Qualification for forgiveness requires work for a U.S. government agency or for certain nonprofit organizations, working full time for that agency or organization, having direct or consolidated federal loans, and monthly payments on time for 10 years while on an income-driven repayment plan.
      • Non-qualifying employment:
        • “Labor unions”
        • “Partisan political organizations”
        • “For-profit organizations (this includes for-profit government contractors)”
        • “Government Contractors”
    • Discharge is also an option if you took out the loans to attend a school that misled you, or engaged in other misconduct in violation of certain state laws.

  • Common Myths
    • MYTH: Everyone will go to college and it will water down the college degree.
    • MYTH: We can’t afford to pay for it.
      • FACT: The plan is funded by imposing a small Wall Street speculation tax on stock trades, bonds, and derivatives that would raise at least $2.4 trillion over the next decade.
    • MYTH: Dependent students from higher-income families typically to attend more expensive institutions; thus, they would get most of the aid if college tuition were free.
      • FACT: Seventy-three percent of the benefits of canceling all student debt will go to the bottom 80 percent of Americans who are making less than $127,000 a year.
    • MYTH: Making college tuition-free would still leave students on the hook for rent, transportation and books, which often comprise the biggest costs for students. 
      • FACT: “Pell Grants would be available to low-income students to cover the non-tuition and fee costs of school, including: housing, books, supplies, transportation, and other costs of living.”
      • FACT: “Participating states and tribes to cover the full cost of obtaining a degree for low-income students (normally those with a family income of less than $25,000) by covering any gap that may still exist after we eliminate tuition, fees, and grants.”
      • FACT: States that choose not to opt into the federal C4A program would leave students on the hook for additional costs, such as books and rent.

2020 presidential candidates were compared on their positions for College for All (C4A), eliminating existing student loan debt, and addressing for-profit colleges. While the candidates are far flung in their positions, Sen. Bernie Sanders is the only one who strongly supports all three solutions. There are other candidates who would leave students better off than they are now and have strong, notable plans. However, there are two candidates who would likely leave our families and the U.S. economy worse off: Buttigieg and Harris.

  • College for All and eliminating student debt go hand-in-hand. To make college tuition-free protects new students from the burden of student loan debt, but this will not help former students who are suffocated with debt. At the same time, to forgive all student loan debt but allow new students to acquire debt will only repeat the problem. As a result, both solutions are required if the student loan crisis is to truly be addressed. While most 2020 presidential Democratic candidates appear to address this problem, there is only one who really understands the crisis and, therefore, supports both solutions.
    • Sen. Bernie Sanders introduced the College For All Act (S. 1947). Funding for this program would come from a tax on wall street. He will also cancel all existing student loan debt. Interest rates would also be capped at 1.88%. Wall Street will pay for this plan.
    • Joe Biden proposes 2 years of tuition-free community college and expanding Pell Grants, taxing the wealthy to do this. He would halve payments on undergraduate federal loans, simplify income based repayment (IBR) plan and make loan forgiveness work for public servants. The super wealthy would pay under his plan.
    • Sen. Cory Booker plans on tuition-free community college and technical school, as well as debt-free four year college. He has his own plan to give every child a treasury bond of $1,000 with yearly deposits based on family income for either college or starting a business. He proposes basic loan forgiveness reform or refinancing to lower rates.
    • Mayor Pete Buttigieg wants to boost Pell Grants to offset living expenses, as well as offering $25 billion for Historically Black Colleges and Universities (HBCU) and Minority-Serving Institutions (MSI). He also offers debt-free public college for lower and middle income families. His plan only applies to cancelling debt for those who attended low-quality for-profit colleges.
    • Rep. Tulsi Gabbard supports Sanders’s College For All Act (S. 1947). She proposes basic loan forgiveness reform or refinancing to lower rates.
    • Sen. Kamala Harris’ plan claims to make community and four year colleges tuition-free by expanding Income Based Repayment (IBR) in order to ensure that students don’t pay more than they can afford. However, IBR is a plan to repay debt – it has nothing to do with making college tuition-free. She’ll establish a student loan debt forgiveness program for Pell grant recipients who start a business that operates for three years in disadvantaged communities. Participants can have up to $20,000 of debt forgiven and can defer all of their student loans, interest-free, during a business-formation period that can last for as many as three years. This will be paid for by a $12 billion capital grant.
    • Sen. Amy Klobuchar famously said at a debate, “I wish I could staple a free college diploma under every one of your chairs. I do. Don’t look. It’s not there.” She proposes basic loan forgiveness reform or refinancing to lower rates.
    • Tom Steyer is not clear about his stance on C4A nor addressing existing student loan debt.
    • Sen. Elizabeth Warren’s plan covers 2-4 year colleges, also taxing the rich to do this. She would cancel up to $50,000 in student loan debt for 42 million Americans and pay for this by taxing the rich. Anything cancelled would not be taxed. Those making under $100,000 per annum would get the full 50 and those making between $100,000 and $250,000 would still get debt cancelled, but not the full 50. The wealthy would not receive the same assistance.
    • Andrew Yang does not believe the four-year route is best for everybody. Instead, he plans to invest in vocational/technical schools. He would allow students to opt into a plan to repay it through pledging 10% of their salary per year for ten years, after which the balance would be forgiven, allow student loans to be discharged through bankruptcy, and asking schools to forgive loans for students that didn’t graduate.
  • Additionally, most of the candidate pool recognizes the problem of for-profit colleges and has strong plans to deal with it. 
    • The Obama administration was the first to have to deal with the student loan debt crisis and the rise of predatory for-profit colleges. As such, his administration put in place a number of policies to address these; however, the Trump administration, through Betsy DeVos, tried to erode these to the benefit of for-profit colleges. 
    • Joe Biden aims to reimpose the Obama era rules. He would “[s]top for-profit education programs from profiteering off of students.” He calls vaguely for for-profits to prove their value to the Department of Education, reinstate the Borrower’s Defense Rule, and forgive debt held by persons deceived by for-profits colleges.
    • Sen. Cory Booker has no plan to address for-profit colleges.
    • Mayor Pete Buttigieg is not clear about whether he would vigorously protect people from for-profit colleges. He simply proposes to apply strict standards to for-profit colleges. 
    • Rep. Tulsi Gabbard has no plan to address for-profit colleges.
    • Sen. Kamala Harris aims to reimpose the Obama era rules. She would crack down on for-profit colleges and lenders that defraud students. She does have receipts in this area demonstrating that she led California in her role as State Attorney General to prosecute for-profit colleges. 
    • Sen. Amy Klobuchar aims to reimpose the Obama era rules. She would enforce “gainful-employment rules that hold career education programs — including those at for-profit colleges — accountable for student outcomes.”
    • Sen. Bernie Sanders would impose a federal ban on building for-profit and charter schools. 
    • Tom Steyer has no plan to address for-profit colleges.
    • Sen. Elizabeth Warren would ban for-profit colleges from receiving any federal dollars (including military benefits and federal student loans).
    • Andrew Yang has no plan to address for-profit colleges.
Tags:

Leave a Reply