Considering Hillary Clinton’s Plan for College Debt

By Emma Elisse

American student loan debt increased by over 84 percent since 2008 to reach a cumulative all-time high of $1.3 trillion this year. It surpasses even total credit card debt as the largest source of household debt across the country. In response, activists are calling upon both the Democrat and Republican parties to make a strong commitment to improving college affordability.

During the primary process of this year’s presidential election, former Secretary of State Hillary Clinton stopped short of fellow candidate Sen. Bernie Sanders in proposing a “free college education for all.”

Sanders' progressive platform appealed to millennial voters for numerous reasons. But this push for tuition-free schooling at public universities was undeniably attractive for a generation held back by a worldwide recession and unemployment.

Now, having vanquished Sanders in the race to the White House, Clinton announced a new and improved plan to alleviate the burdens of student debt on young people. Clinton’s proposed program aims to provide relief to the many young people who see their financial future undermined by an unfair borrowing system. It also seeks to promote entrepreneurship by making higher education more affordable overall in addition to offering certain incentives for the creators of new enterprises.

Under Clinton’s New College Compact, students will “never have to borrow to pay for tuition, books and fees to attend a four-year public college in their state." And those already out of school will be able to refinance in order to obtain debt relief.

Though the recent surge in student debt began under President George W. Bush, it nearly doubled throughout Obama’s term. Clinton’s proposal stands to radically change things for student loan borrowers, if it is implemented as written. If elected, Clinton could implement her new policies immediately using the executive powers of the presidency rather than waiting for congressional approval. But would she? 

Details of the revised New Compact were unveiled at the start of the month. Clinton's plans center on a three-month moratorium on federal student loan repayments, during which borrowers would have the opportunity to restructure their debts or refinance them at lower interest rates. This aspect of her proposal alone is expected to cost the federal government upwards of $1 billion.

Beyond rearranging loan terms to make it easier for people to repay, Clinton is also looking ahead toward a wider program of debt forgiveness. Those who enter into public service -- including teachers -- could have the entirety of their student debts wiped away after 10 years of making payments. Those who teach certain subjects (STEM courses, specifically) for which there's a shortage of qualified educators will receive additional benefits.

Building upon current government scholarships and student loan forgiveness programs which provide incentive for students to choose a service-oriented career path, Clinton maintains that her loan programs will encourage “community building” and broader citizen engagement across the U.S. "Young people willing to commit to public service deserve to live free from the crushing burden of student debt," Clinton said in the campaign's initial release last summer.

For young entrepreneurs and small business owners, Clinton’s Initiative on Technology & Innovation (packaged within the larger loan proposal) may help relieve some financial stress and support more new business pursuits. Her initiative will allow entrepreneurs to defer student loans interest-free for up to three years while they're trying to get their businesses up and running. Not only will the founders of startups be able to take advantage of this program, but it will also be available to the first few key employees whom they bring on board their companies.

Innovators working in “distressed” communities can also apply for forgiveness of up to $17,500 of their student loans after five years. Some pundits have criticized this step because it will put money in the pockets of those who are already capable of gathering the resources to fund the creation of a business in the first place. But for millennials, any new programs with the potential to create jobs are more than welcome.

Most of Clinton's proposals will affect those who have already taken on student loans. But she's also looking to halt or reverse the “popularity” of such loans in the long term. According to remarks on her website, she understands that “this debt prevents people from forming families, buying homes, and starting small businesses.” Interestingly, borrowers in their 30s and 40s often have higher average levels of student debt than those in their 20s. Clinton stands to significantly increase her popularity among millennials with this program, but she may also be able to court those in other age brackets who are still paying off their student debts.

If Hillary Clinton is elected president, her College Compact has the potential to enact far-reaching change. Were millions of Americans to be suddenly liberated from crushing student loan debt, as well as able to send their children to college loan-free, the immediate economic and societal impacts would be enormous. Though her plans still need some work before they pass the bill in the White House, these proposals are indicative of a promising shift in current political thinking.

Image credit: Pixabay

Emma Elisse is a freelance writer and blogger from the central Midwest. After completing her undergraduate degree in Florida she relocated to Chicago, where she now works, writes and lives with her pet rabbit Anthony Hopkins.