Student loans take center stage this coming presidential election. All contenders from both parties consider it as a big-ticket issue and they know that to fix the broken higher education loans program would require the biggest government attention within the next few years.
It’s no surprise that both Democratic and Republican presidential candidates touch on this issue. College affordability and clear-cut programs that aim to help the young generation get into college and pay off their student loans is the single biggest political topic that can unite millennials behind one candidate. But saying that it’s really all about the votes is only half right. College loans may well determine the very survival of the economy.
For years, the student loans program has been hounded by problems that, if not solved in the next few years, could snowball into another financial crisis. Unpaid college loans now amount to about $1.2 trillion. This figure is more than the outstanding credit card and auto loans owed by households in the US. To cut the story short, if borrowers defaulted on their student loans, it could tear down the economy in a way that could make the 2008 housing bubble look like a blip in the history of financial downturns.
Indeed, any presidential election is bound to have an impact on this issue, especially now that more than 40 million young Americans have outstanding student loans. While the effects can only be gleaned when the dust settles after the election, the plans or proposals put forth by major contenders for the White House provide the likely outcomes that could happen in the next administration.
Possible Effects on the Issue of Student Loans
- Increased Government Aid. This is largely the driving force among Democratic candidates. With more government spending aimed at drastically cutting interest rates or refinancing debts, borrowers can breathe easy and even look forward to possible loan forgiveness.
- Involved Private Sector. For some candidates, increasing the role of private financial institutions can help solve student loan problems. Private lenders can offer debt restructuring programs and take the hot potato off the federal government’s hands.
- More Regulation for Colleges and Universities. At least one Republican candidate wants higher education providers to let students know the key statistics in their programs so that they will be better informed in getting the best value for their college education. Other candidates want schools to ensure that their programs lead to gainful employment. Whoever wins the presidency, colleges and universities can look forward to expanded government regulation.
- More Policies to Drum Up the Economy. At least two Republican candidates believe that an improved economy is a better solution compared to active government spending and oversight. If elected, this can mean more policies directed towards stimulating the economy and opening up more jobs to ease the burden of paying student loans.
Summary of Student Loan Reform Proposals
Before you pick your choice for the next President, it is important to know what the major candidates have in mind regarding college debts.
Democratic presidential candidates want to make college education more affordable, if not totally free. They want to cut student loan interest rates and offer some form of debt refinancing for borrowers.
- Hillary Clinton
She proposes lower interest rates and restructuring student debt payments through refinancing options for borrowers who have already graduated. Clinton also wants free community colleges and opportunity for students to go to public universities without incurring student debts.
To achieve her plans, the Democratic contender wants individual states to raise their stakes in higher education. These state-level investments will be further boosted by federal government grants to colleges and universities with improved graduation rates. In other words, increasing state spending will bring about more investment from the federal government, which in turn will bring down tuition costs and make student debts more affordable.
- Bernie Sanders
The student loan reform plan being offered by Sanders is simple. He wants free tuition in all public colleges and universities. To achieve this goal, he wants to set aside a certain amount of federal money each year to eliminate all tuition fees in all public higher learning institutions in the US. And any remainder between the allocated federal funds and the actual tuition fees in the country will be shouldered by individual states.
Government funding will be raised via tax, called speculation fees, which will be imposed on all financial market transactions. It means Wall Street will largely pay for the tuition fees of all public colleges and universities.
- Martin O’Malley
O’Malley has two main goals in his proposal. One, within five years, he wants all students to have access to quality and debt-free higher education in public colleges and universities. And two, within ten years, O’Malley wants a 25% increase in college completion rates.
To achieve these goals, he proposes immediate relief to all student debtors by way of refinancing and linking loan payments to the borrower’s income. He also wants reduced and fixed tuition in public colleges and universities while giving more benefits to students belonging to low and middle-income families.
It’s clear that Republican presidential candidates want less government intervention on the issue. For them, the government should not provide financial support to public higher education institutions by increasing taxes. As of now, Republican presidential contenders have yet to announce concrete plans on how to reform student loans. But the most outspoken party candidates have provided the gist of their positions on the issue.
- Jeb Bush
As Governor of Florida, Bush implemented sweeping changes to the state’s educational system. For many, his legacy makes him the candidate suitable for reforming the student loans system. He wants incentives for colleges and universities that will promote individualization and wider choices for students. Also, he wants to bring down the costs of going to college, while enhancing the value of a college diploma.
Bush has linked higher education reforms to the national economy. For him, reforms will bring about strong economic growth. Additional polices are also needed to help the economy and stimulate workforce participation.
- Marco Rubio
The student loan reform issue is close to Rubio’s heart. When he was first elected as senator in 2011, he still had an outstanding student loan amounting to over $100,000. He has recently filed three bills centering on student loans and these bills may well reflect his stand on the issue.
First, he wants to restructure loan payments such that borrower’s income is taken into consideration. Second, providing private financing options as a means of repaying student loans and tuition fees. And third, make colleges and universities accountable by showing their key statistics, like average graduation rates, so that students are better informed when choosing their programs.
- Donald Trump
For billionaire Donald Trump, his take on student loans center on the fact that he does not agree with the government actually making money on federal student loan program. Trump also wants to focus on growing the economy as a means to stave off the looming student debt crisis.
There’s no doubt that all the proposals put forth by presidential contenders are geared towards winning the votes of millennials who comprise the largest portion of the population affected by student loans. This coming presidential election puts at stake the future of the American workforce which can very well influence the future of the whole nation as well.