Clinton, O'Malley, Sanders, and Student Loan Reform: What Should We do?

Young woman in a graduation mantle and a hat climbing stairs with a heavy ball chained to her leg, vector illustration
Young woman in a graduation mantle and a hat climbing stairs with a heavy ball chained to her leg, vector illustration

All three of the major Democratic presidential contenders have released plans with their ideas on how to fix our student loan crisis. (Note: I have publically endorsed Bernie Sanders.) All of their plans include excellent ideas about how we can address this crisis. Something I frequently talk about on the campaign trail is how we are turning our students into profit centers, as they borrow at 6 to 12 percent, and our banks into charities, as they borrow at below 1 percent. Economists will give complicated reasons as to why that is the case, but sometimes the simplest response is the best one. And, in this case, it is that something is tremendously wrong with those rates. Student debt also has restrictions on refinancing and no bankruptcy protection. As it stands, our student loan mechanism is ludicrously flawed, but we can take measures to fix it.

Here is what the presidential candidates say (with my comments in italics):

Martin O'Malley

  • Refinance student loans the same way home or business owners can

  • Lower interest rates for not just new borrowers but everyone with a student loan
  • Cap the monthly payments on these student loans
  • Automatic income-based payment plan
  • income based payment plans exist thanks to the Obama Administration, but enrollment is low
  • Low and middle-class students cap payments at 10 percent of monthly pay
  • Make sure colleges who receive federal money for financial aid are giving it to those who need it most, and reward those colleges that make attendance affordable.
  • This plan is missing free public university, but does a great job addressing not only the cost of college for new borrowers but also helping past borrowers that are drowning.

    Bernie Sanders
    • Eliminate undergraduate tuition at public four-year colleges and universities

  • Expand work study programs
  • Lower interest rates to around 2 percent
  • Refinance current student loans at a lower interest rate
  • Pay for with a Robin Hood tax on Wall Street
  • The total tuition for public colleges and universities is about $70 billion -- the federal government would cover 67 percent of that cost while the state would cover the other 33 percent.
  • As always, Bernie's plan is sweepingly progressive. To me it is the most comprehensive plan out there. I think it should have more language about giving some bankruptcy protection to student loan borrowers.

    Hillary Clinton

    • Eliminate undergraduate tuition at public four-year colleges and universities

  • Refinance student loans at current rates (lower interest rates)
  • Pay for by limiting certain tax expenditures for high-income taxpayers
  • Allow everyone to be enrolled in an income based repayment program
  • Cap payment at 10 percent of monthly income

  • Hilary is better late than never with this plan as she was the last to announce hers. Even so, it goes almost as far as Bernie's plan and has better language around capping monthly payments, which is crucial.

    To me, all three of the plans are admirable. And, importantly, they are driving a national conversation about how vital it is that we address this issue. If we want our students to continue to educate themselves and continue the tradition of making the American workforce the best in the world, then we must encourage education rather than put up barriers.

    I can't tell you how many friends have forgone advanced post Bachelors degrees in order to avoid the crushing debt that comes with it. Similarly, many people are skipping or delaying the completion of their Bachelors degree because they simply can't afford it. This is America, and if people want to better themselves and learn more, we absolutely need to make it affordable.