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How Hillary Clinton might solve the student debt crisis

How Hillary Clinton might solve the student debt crisis

Hillary Clinton has only been on the (official) campaign trail for a few weeks, but she is in the midst of putting together a plan to tackle the nation’s student debt crisis.

It will likely be months before that plan is ready for the public eye and her camp did not respond to a request for comment, but judging on her track record, we have a pretty solid idea of what Clinton might have in store.

In the battle between lenders and borrowers, Clinton has historically been on team borrower.

On her first official campaign stop last month, Clinton dropped by a community college in Iowa, telling representatives and students she fully supported President Obama’s plan to make community college free. But she said more work is needed.

“Even if we were successful in making the costs directly associated with going to college free, there are all these other costs people have to figure out how to pay,” she said. “There are all these other costs, whether it’s books or online materials.”

A day later, she was at New Hampshire Technical Institute, where she acknowledged the “daunting” cost of college. “You can’t expect people to take on that much debt and easily pay it off,” she said.

So she gets it. But how would Clinton herself help make college more affordable for the masses? In addition to free community college access, she vocally supported income-based repayment, decreasing overall tuition costs, making it easier to finance federal student loan debt, and developing more work-study programs. The latter issue is a personal one for both Hillary Clinton and her husband, Bill, who both participated in work-study programs while in law school.

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In 2006 and 2007, then a Senator from New York, Clinton proposed the Student Borrower Bill of Rights, which would have made it easier for cash-strapped student borrowers to pay back their loans, have their loans refinanced, qualify for income-based loan payments, and discharge student debt in bankruptcy.  

The bill never made it past the Senate, but she threw her weight behind the College Cost Reduction and Access Act shortly after. The act, which passed, not only expanded the Pell Grant program but gave graduates the ability to apply for income-based repayment loans and loan forgiveness for those who chose careers in public service.  

Since then, the income-based repayment plan has been expanded to all federal student loan borrowers. And in March, President Obama introduced his own Student Aid Bill of Rights in the form of a presidential memorandum (that means it does not require Congressional approval). It calls for a national complaint forum for student borrowers, a centralized student loan tracking website, tougher rules on debt collectors and the ability to discharge some student debt in bankruptcy.

Still, there’s a lot more work to be done to put a dent in the student debt problem. The cost of college has reached astronomical levels. In 2014 dollars, tuition rates increased 225% over the last three decades. The typical college graduate is shouldering a $30,000 debt load. And the Consumer Financial Protection Bureau reported that complaints against student lenders were up 38% in 2014.

The challenge will be finding a smooth way to plug all the leaks that got us to this point. Clinton has said so herself, most recently during at a Q&A session at Twitter’s headquarters last July.

“It’s hard to relate the rise in cost to the actual product that has certainly changed somewhat but not so dramatically as to justify those costs,” she said during the Q&A. “I think colleges and universities have to do more to keep costs down and do more on financial aid so people can come to college without having to bear the cost themselves...It’s going to take a lot of work because there’s a very strong institutional interest in keeping costs high.”

On that front, she can expect to get a lot of pushback from university administrators, who largely blame cuts in state funding for rising tuition costs. Meanwhile, their critics point to exorbitant rises in administrative costs over the last decade and question their impact on rising tuition rates. Colleges hired administrators at a rate 50% higher than professors between 2001 and 2011, according to the Department of Education.

According to a report by the Government Accountability Office, state funding for all public colleges decreased by 12% overall while median tuition rose 55% across all public colleges between 2003 and 2012. States, of course, point to the recession to explain the trend. As it stands, public colleges and universities are receiving more revenue from tuition than state funding (25% from tuition vs. 17% from state).  

Despite all this, Paul Combe, president of American Student Assistance, a nonprofit that helps college graduates repay their loans, says he hopes Clinton dispels some of the myths around the rising cost of college: namely, that a college education is no longer a valuable investment.

“I worry so much that all the hype about the student debt crisis is actually turning people off from college,” Combes says. “One of the first things she can do is talk about it as a solvable problem.”

The federal government has been doing more to help students manage their debt, especially with programs like Pay As You Earn, which caps monthly federal student loan payments as low as 10% of a worker’s discretionary income. It’s a great program that would likely prevent a lot of grads from defaulting on their loans, but the problem is getting the word out about it. So far only 14% of eligible borrowers have taken advantage of the program.

“Virtually no one should ever default on a federal student loan,” Combes says. “The key element is it’s only a solution if you can get in touch with a person.”

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