Hillary’s student debt plan sorely lacking

Hillary Clinton unveiled her higher education plan this week, and I am very sorry to say that it is a significant step backwards from where she was a decade ago. Here’s why:

Broadly, the plan outlines a wide range of funding mechanisms that would be used to cut tuition costs for future students, but it does essentially nothing to push the prices of college back down to rational levels.  It really is not clear, even, that the plan would reduce borrowing significantly for most students, except perhaps at the community college level, which would be free under the plan.  If I were a Republican (I am not) I would point to this as just another example of Democrats throwing money at a problem rather than solving it…and I’d be right!

{mosads}Most importantly however: Clinton’s plan would do almost nothing to address the massive, $1.4 trillion debt burden that is currently being inflicted upon over 40 million citizens, 25 million of whom are currently unable to make timely payments on their loans.  The only item I could identify that would have any benefit for these citizens is a refinancing plan, similar to Sen. Elizabeth Warren’s (D-Mass.) that might save a few percentage points in interest for borrowers, but as interest rates rise, even this very modest benefit will decrease, and could be non-existent by the time such a plan were ever implemented.  

The repayment plans that the Clinton promotes are, frankly, old anchors dressed up like life jackets.  They are being administered by a Department of Education that has no desire or intention of forgiving any student loans, and is running these programs like credit card teasers, where only a tiny fraction of the people signing up for the programs will actually get the benefit.  Most will be booted from the programs prior to completion, and will be left owing far, far more than when they began.  To see the Clinton team trot these out yet again is frankly an insult to those of us who are well-studied on these and other ill-fated fixes promoted by legislators over the years.  The Gainful Employment rule is another example, but I digress…

In 2006, Hillary introduced the Student Borrower Bill of Rights Act.  This bill would have put upper limits on the amounts that student borrowers pay on student loans. It also paved the way for the return of much needed bankruptcy protections to all student loans, and would have allowed true refinancing of student loans in an open market, not a federalization of the debt as the current proposal appears to promote.  So to say the Clinton Plan is sorely lacking is actually generous.  It is more of a huge step backwards.  

Clinton is reportedly taking her marching orders from the Center for American Progress, a think tank that is using a “Good Ol’ Boy”, David Bergeron- who helped run the Department of Educations lending program for 30 years- to shape her higher education policy, and what we are hearing is guaranteed to perpetuating the status quo.  Bergeron and others at CAP make it sound like they are for the return of bankruptcy protections to student loans, but in fact have no intention of returning this bedrock protection.  CAP has clearly been captured on this issue.  It shows up in their white papers, and it shows up in their funding, which includes donors like DeVry Institute, Wells Fargo, Goldman Sachs, Bank of America, CitiGroup, and many other student lending players (I would paste a link to the full list, here, but CAP has conveniently removed it from their website).

Sources I know close to the campaign have told me that the Clinton team has “evolved past” the return of bankruptcy protections, but in which direction?  Last month, Robert Reich, Berkeley professor of public policy (and Labor Secretary under Bill Clinton) joined conservative commentators like David Brooks in calling for a return of bankruptcy protections to all student loans.  That even this modest solution was excluded from Clinton’s plan speaks volumes about the beltway bias of her team, and (I would say) the intellectual integrity of her advisers on this issue.

Given that as far back as 2004, the Department of Education was actually making a profit on defaulted student loans,  the convergence between Reich and Brooks makes increasing sense.  Given that the Department of Education booked $41 billion in profits from the student loan system in 2012,  it is similarly unsurprising that Donald Trump joined Elizabeth Warren in decrying it’s obscene profit-making at the expense of students.  

The Green Party would forgive student loan debt across the board- paid for by a Wall Street tax.  When election time comes, if the Big Party candidates still have no real answers, at least the 25 million people they’ve thrown under the bus will have someone to vote for.

But I hope it doesn’t come to that. There is still time for Clinton, Trump, and the other presidential candidates to address this issue head on. I truly hope that happens, and so do 25 million other citizens- and their families!

Collinge is founder of StudentLoanJustice.Org, and author of The Student Loan Scam (Beacon Press, 2009).