Should the government provide debt-free college? | The Tylt
Should the government provide debt-free college?
Student loan debt is now one the largest financial burdens Americans carry. Per Forbes:
The latest student loan debt statistics for 2019 show how serious the student loan debt crisis has become for borrowers across all demographics and age groups. There are more than 44 million borrowers who collectively owe $1.5 trillion in student loan debt in the U.S. alone. Student loan debt is now the second highest consumer debt category - behind only mortgage debt - and higher than both credit cards and auto loans. Borrowers in the Class of 2017, on average, owe $28,650, according to the Institute for College Access and Success.
Many argue simply turning financial aid over to state and federal governments will not solve the problem. Currently, financial aid comes from myriad sources, both public and private. Private funding is frequently more stable than its federal counterpart, as there is no requirement to balance budgets or fights over cutting taxes to change their bottom line. Per the Nation:
The question of financial sustainability looms largest for legislators. It’s easier to promise a free degree down the line when budgeting one fiscal year at a time. College Promise programs are typically funded by a hodgepodge of private and public sources, from technology and oil companies to liberal philanthropic trusts, or even state lottery funds. If state budgets are as unstable as poor students’ yearly incomes, a Promise could turn out to be just as precarious, subject to political whims, or the politicized agendas of large donors (like tech companies looking for STEM graduates), all of which could make it nearly impossible to guarantee funding for the duration of students’ long-term degree programs. (Besides, many could suffer from low job prospects even after graduation).
Even if funding was subsidized by the government, the relationship between states and the federal government is frequently antagonistic. In July of 2018, Democrats proposed a bill which they hoped would overhaul tuition funding. According to the Washington Post, it also pointed out some glaring issues with federal oversight of education.
Democrats are proposing to give students the chance to earn a degree without debt, in part by creating a state-federal partnership that calls on states to provide two years of community college tuition-free. In exchange for federal funding, states would have to promise to invest more in higher education — and maintain those investments.
But such a requirement would probably face pushback even in some states with liberal-leaning politicians, said Robert Kelchen, assistant professor of higher education at Seton Hall University in New Jersey. In many states, legislators shift money from higher education to other areas in which spending is mandated. “Taking away that flexibility would be a nonstarter in many states,” he said.
Even if states agree to work with the federal government, problems could quickly arise. States also have a history of micromanaging where and how educational money is spent. The Atlantic describes restrictions which could be put on state money.
But the disadvantage of focusing on state programs is that states simply have less money. “Doing it at the state level is uniquely challenging just because there are much more severe budgetary constraints,” Dancy told me. That means there are limitations on the amount of money they can—and are willing to—spend on free-college programs. But it also means that states put restrictions on programs to keep costs down, including limiting the tuition-free program to coursework at community colleges; only allowing students to study certain subjects; or requiring students to live and work in the state for several years after the program is complete. And then there are sometimes eligibility requirements on the front end. Some states only offer free tuition to recent high-school graduates with a certain GPA; or they may mandate a drug test.
However, proponents of debt-free college—unlike "free college," which does not provide funding for outside costs such as housing and books—say plans can be flexible and integrate many services already being used. Per the Atlantic:
The United States has a long history of college-access and -affordability policies—the first Morrill Act, the GI Bill, etc.—that did not provide equitable access or universal affordability, particularly for minorities. Advocates hope that a similar mistake won’t be made with a potential national free-college policy, and that debt-free college becomes the new gold standard.
“That’s the beauty of debt-free college programs: There is a lot of flexibility in there on policy design,” Mark Huelsman, a policy director at Demos, a liberal think tank, told me. A candidate could, for example, propose massively expanding access to the Pell Grant program so that more working- and middle-class students were eligible, and then subsidize education at HBCUs or private institutions that serve large shares of low-income students. A policy could, as Senator Brian Schatz’s Debt-Free College Act does, incentivize states to invest more in free-college programs by providing a one-to-one federal match on state spending.
Many of the Democratic presidential hopefuls have laid out their plans for how to deal with student loan debt, none more comprehensively than Elizabeth Warren. Warren is advocating for universal free college and a retroactive cancellation of student loan debt for thousands of Americans. All of which, she says, can be paid for with a tax on the wealthiest Americans. Per the Atlantic:
In a Medium post, Warren criticized the government’s hands-off approach as affordable access to America’s universities declined. “Rather than stepping in to hold states accountable, or to pick up more of the tab and keep costs reasonable, the federal government went with a third option: pushing families that can’t afford to pay the outrageous costs of higher education towards taking out loans,” she wrote in the post. To remedy this, she is calling for a series of ambitious proposals, including the cancellation of student debt, universal free public college, and greater support for minority and low-income students. Of course, Warren is not the first politician to call for any of these policies specifically, but the details of her plan separate her reform package from the pack; she plans to pay for it with her “ultra-millionaire tax”—an annual 2 percent tax on families with $50 million or more in wealth. Critics of a wealth tax argue that it would be difficult to implement—accounting for assets such as antiques or land poses considerable difficulties—and that it would lead to more aggressive tax avoidance.
Warren’s plan would cancel student debt up to $50,000 for borrowers who make less than $100,000 a year. For every $3 a borrower earns yearly over that $100,000, the amount of debt forgiven would decline by $1 . “So, for example, a person with a household income of $130,000 gets $40,000 in cancellation, while a person with household income of $160,000 gets $30,000 in cancellation,” she wrote. Those who earn more than $250,000 a year would not be eligible for any debt cancellation, and the cancellation for borrowers who do receive it would not be treated as taxable income.