In America, student loan debt has reached crisis proportions. Graduates in the class of 2015 incurred a whopping $68 billion in student loan debt, averaging $35,000 per student. More than 70 percent of undergraduates – and 17 percent of parents – are forced to take out loans in order to keep up with the ever-increasing cost of college.
Student Debt Affects Us All
But the debt incurred by current students and recent grads only tells part of the story. Americans across the age spectrum are shouldering the burden of student loan debt. By the end of 2015, outstanding student loan debt was a staggering $1.23 trillion – with more than 11 percent in serious delinquency or default.
Hillary Clinton knows that this trajectory is unsustainable. She knows that the weight of student loan debt makes it nearly impossible for graduates to start small businesses – the engines of job growth in America. She knows that student loan debt disproportionately burdens the African-American community, which has both a higher percentage of student loans and a higher per capita student loan balance. And she finds it unconscionable that student loan borrowers are stuck paying interest rates as high as 13 percent. That’s why Hillary says, “We need to make a quality education affordable and available to everyone willing to work for it without saddling them with decades of debt.”
Hillary’s plan, “The New College Compact,” calls on federal and state governments, and colleges and universities, to work with students and families to make a debt-free college education attainable and to make existing crushing student loan debt manageable.
Hillary isn’t advocating for a blanket giveaway, where even children of the wealthiest Americans would get a free ride. Instead, her plan champions lower income and middle class families. Hillary pledges, “You will never have to borrow money to attend a public college or university. The money that you will need will be provided if you cannot afford to go to college. And, right now, given the costs, that covers most people except wealthy people.”
Hillary believes that everyone should do their part. Under her plan, students would contribute wages from 10 hours of work per week. Families would pay an affordable and realistic amount, likely analogous to the Expected Family Contribution currently determined by the federal government via the Federal Application for Student Aid (FAFSA) application. Colleges and universities would stop the spiraling cost of attendance while improving graduation and retention rates. State governments would maintain funding levels, and the federal government would slash student loan interest rates and provide grants to states that adopt the plan.
Americans who currently have student loan debt would see their burdens lifted. Under The New College Compact, borrowers could consolidate their student loans and refinance at lower interest rates. According to Hillary, “It just makes sense, if you can refinance your mortgage or your car loan, you should be able to refinance your student loan too.”
After refinancing, the borrower’s monthly payments would be capped at 10 percent of their income. In addition, those whose loans are in default would receive help to ensure that their credit isn’t decimated.
Best of all, Hillary’s plan won’t break the budget. Over 10 years, The New College Compact is estimated to cost $350 billion,8 which will come from closing tax loopholes utilized by only the wealthiest Americans.
The New College Compact is yet another example of Hillary’s progressive pragmatism. Rather than offering platitudes, she’s done the hard work of crafting a plan that incorporates elements of proposals offered by everyone from Sen. Elizabeth Warren (D-MA) to Sen. Lamar Alexander (R-TN) to President Barack Obama – while adding fresh solutions to historically intransigent problems.