Clinton's College Plan Not Quite a "Debt-Free" Education

Clinton's College Plan Not Quite a "Debt-Free" Education

Hillary Rodham Clinton recently unveiled her proposed $350 billion plan to address the growing student debt crisis and make college more affordable for millions of Americans. But the initiative, announced Monday at a town hall meeting in New Hampshire, is not quite the "debt-free" solution put forward by the competition. 

As the current front-runner for the Democratic nomination, Clinton was under pressure to produce such an announcement after her challengers, Bernie Sanders and Martin O’Malley, made student debt a central issue in the race for the Democratic nomination with their respective “debt-free” education pledges. Yet her proposed plan places much of the onus on individual states by creating a $200 billion dollar federal system aimed at both incentivizing states to invest in higher education and attempting to cut student costs. Individual states can opt in by guaranteeing “no-loan” tuition at four-year, public schools and free tuition at community colleges (the latter very similar to President Obama’s current $60 billion community college proposal). Increasing amounts will be awarded to states that enroll a high number of low- and middle- income students, as well as those that attempt to reduce living expenses.  

With some of the remaining $150 billion, Clinton’s plan would attempt to boost graduation rates by offering grants to schools that invest in improving their on-campus support systems, such as child care and emergency financial aid, a nod to the fact that the average age of college students is increasing and, as such, their needs are changing.  Additional federal funding will also be available for private schools with “modest endowments” that serve a high percentage of low-income students (for example, historically black colleges).

Under this system, veterans, low-income students and those who participate in a national volunteer program, such as AmeriCorps, which Clinton plans on more than tripling in size, would go to school for free (though, it’s important to note that Pell grants for low income students aren’t included in the debt calculations, so it’s assumed those funds will go to cover such unaddressed items as books and room and board). However, Clinton’s proposal stops short of making the same “debt-free” promise that her challengers have. Under Clinton’s plan, most students who don’t fall into the above three groups will still be expected to make a “realistic,” albeit reduced, contribution in paying for their educations based on student circumstances and the school they choose to attend.

For those currently struggling with student-debt, the plan would offer very limited relief. It would allow such debtors to refinance their loans, saving the average person about $2,000 over the entire life of the loan. The proposal also seeks to expand income-based repayment options, which would cap payments at 10 percent of the borrower’s current income and offer full debt forgiveness after 20 years. So, a little bone thrown to current debtors, but not much.

The proposal would be financed by reintroducing the Reagan-era limits on itemized tax deductions, such as those taken for charitable contributions, for high-net-worth families, capping such deductions to 28 percent. This aspect of the proposal is the main point where it diverges from that of Bernie Sanders, who instead proposed a tax on Wall Street transaction to pay for everything; nonetheless, it’s nothing new, as a similar cap has been included the past several drafts of President Obama’s annual budget. According to the Treasury Department, it would produce an estimated $600 billion over the next 10 years if enacted.

How much bipartisan traction, if any, these plans will get nationally is debatable, as President Obama's current free community college proposal (which is in a very similar vein to those espoused by the potential nominees) hasn't exactly set the world on fire. However, student debt is an issue of major concern to young voters, so it's at least useful to establish a starting point for the debate. 

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