My view on student debt problems is somewhere between Bernie Sanders and Hillary Clinton. I don’t believe that free college is economically feasible but my evaluation of statistics on the growth of student debt, the growth in overextended borrowers, and the growth in the number of elderly with unpaid student loan balances convinces me the college debt problem cannot be solved with minor adjustments.
My book “Defying Magnets: Centrist Policies in a Polarized World” attempts to find progressive centrist (not an oxymoron) solutions in three areas — student debt, health insurance, and retirement income.
The analysis in this book leads me to propose substantial increases in financial assistance concentrated on first-year students, changes to student loan contracts, and changes in programs and policies designed to assist overextended student borrowers. The overview of the student debt section of my book is below.
Overview of Student Debt Issues
The Republicans and Democrats are far apart on their approach to student debt and the increasing cost of college.
The Trump Administration and many Republicans in Congress are more interested in reducing taxpayer costs than assisting students borrowing for college. Their current proposals include — the repeal of subsidized student loans, the elimination of the public service loan program and major modifications to income contingent loan programs. Their administrative actions and enforcement decisions almost always favor loan servicers and for-profit schools over students.
The Democrats have been advocating free-college or debt-free college at public universities. Democrats also favor the Income Contingent Loans, a program that links loan payments to income and offers to forgive unpaid loan balances at the end of the loan term.
The analysis presented here indicates that Trump Administration proposals would adversely impact many students. Proposals by Democrats to offer free or debt-free college are expensive and inefficient. Moreover, Income Contingent Loan programs are not the most effective way to assist overextended borrowers.
Proposals are presented for additional financial assistance, which are designed to reduce the growth of student debt. These proposals include:
- Provision of additional assistance for first-year students.
- Allocation of a modest sum to a program that funds college internships at start-up firms.
Proposals are offered to assist overextended borrowers and reduce the reliance on Income Contingent Loan programs. These approaches include:
- Interest rate reductions on student loans after 15 years of payments
- Limits on increased student loan interest rates when general interest rates rise.
- Limits to the liability of parents on PLUS loans and cosigned private student loans and other alterations to the PLUS loan program.
- Provision of priority to student debt over consumer loans in chapter 13 bankruptcy
- Allowing discharge of private student loans in bankruptcy
- Revisions to the Public Service Loan Program
The proposals presented here have the potential to expand access to education and improve the financial condition of student borrowers entering the workforce. Additional subsidies are carefully crafted to assist people who might not otherwise try higher education or would experience severe payment problems.
The proposals presented here also will be less costly to taxpayers than many current policies and policy proposals.