D. Marie Donald Trump’s student loan plan appears to take a page from Obama’s book
We just got our most detailed look at how a president Donald Trump would curb student debt.
Invoking his famed book “The Art of the Deal,” Trump vowed to tackle the student debt crisis, saying he would “work it out big league” if elected. Specifically, Trump told a crowd in Columbus, Ohio, that borrowers would never be required to spend more than 12.5% of their income paying down their student loans and if they make payments for 15 years “we’ll let them get on with their lives.”
“Students should not be asked to pay more on their loans than they can afford and the debt should not be an albatross around their necks for the rest of their lives,” he said. “And that’s what it is.”
Over the course of the campaign Trump has acknowledged the importance of college affordability and student debt to voters, but Thursday’s speech offered the most specific indication as to how he would tackle these issues. And, perhaps surprisingly, his proposal builds off programs touted and expanded by the Obama administration.
Right now, federal student loan borrowers do have the option to have their loan payments capped as a percentage of their income through a variety of payment plans known together as income-driven repayment. The most generous of these plans allows borrowers to put 10% of their income toward their loans for 20 years and then have the remainder forgiven. Hillary Clinton, the Democratic candidate for president, has vowed to streamline the income-driven repayment system.
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It wasn’t immediately clear whether Trump would scrap these options in favor of his proposal or simply add the option for borrowers to pay 12.5% of their income and have their loans forgiven after 15 years. The Trump campaign didn’t return a request for more details on the proposal.
But from the details we know, the plan appears to offer more forgiveness, particularly to high-debt and relatively high-income borrowers, than the laws currently on the books, said Jason Delisle, a resident fellow at the American Enterprise Institute, a right-leaning think tank. In back of the envelope calculations, Delisle estimated that a borrower with $100,000 in debt earning $50,000 a year and assuming they get regular raises over their repayment period, would pay about $10,000 less over the lifetime of their loan under the Trump plan than under current rules.
That’s because the borrower would have her loans forgiven five years earlier and the later years of repayment are when the government collects the most money because a borrower’s income is presumably higher.
“Knowing what we do know it appears that they’ve made a plan that Obama made more generous, even more generous,” said Delisle, who is a frequent critic of income-driven repayment programs both because of their cost to taxpayers and because he argues they largely benefit graduate students, who often have high debts but also high incomes. He said it’s possible the Trump campaign could add other provisions that would make it less generous, such as getting rid of the program that allows borrowers in public service to have their loans forgiven after 10 years.
In his speech, Trump also addressed how he would curb college costs, building on earlier statements he’s made on the topic. He said he would “push colleges to cut the skyrocketing cost of tuition” in part by reconsidering whether the endowments of universities that don’t work to cut costs should be allowed to keep their preferential tax status.
Congressional Republicans are increasing scrutiny on university endowments. Gifts to these funds are tax-free for donors and earnings from them come tax-free to universities. Critics have said colleges don’t spend enough of their endowments on students. An August report from think tank Education Trust found that if 35 of the wealthiest private universities spent 5% of their endowments they could fund tuition of 2,376 students from low-income families.
“If the federal government is going to subsidize student loans it has a right to expect that colleges work hard to control costs and invest their resources in their students,” Trump said in his speech.
Trump criticized rising college administrative costs
Trump also cited more traditionally conservative talking points to explain the rise in college costs, including so-called administrative bloat, or the growth in administrators at universities, a controversial explanation for skyrocketing college tuition. The Republican candidate also criticized the cost of government regulation to universities.
“As president I will immediately take steps to drive down college costs by reducing the unnecessary cost of compliance with federal regulations so that colleges can pass on the savings to students in the form of lower tuition,” he said.
On this point, Trump appears to be taking a different tack than current officials. Over the past few years, the Obama administration has cracked down on for-profit colleges. Some critics derided the administration for taking too long to expand oversight of these colleges, which have been accused of luring students with false promises and saddling them with too much debt.
“In certain sectors it was the lack of regulatory structures that allowed prices to rise,” said Mark Huelsman, a senior policy analyst at Demos, a left-leaning think tank that consulted with the Clinton campaign on the candidate’s college affordability plan.
Huelsman said he found some portions of Trump’s speech, like his endowment proposals “interesting,” but overall the plan lacked detail and failed to address “the root causes of the affordability problem.”
“There was no recognition of a need for new public investment,” he said.
Many, including Clinton, have pointed to state disinvestment in higher education as a major reason for the rise in college costs over the past several years. Under Clinton’s college affordability plan, students from families earning $125,000 or less would be able to attend a public four-year college for free. That proposal is part of a broader plan from Clinton that would use federal funds to incentivize states to invest more in their higher education institutions. The plan also includes proposals to help borrowers currently dealing with student debt, like streamlining income-driven repayment programs and allowing borrowers to refinance their loans at lower interest rates.
Tyrone Gayle, a spokesman for the Clinton campaign, noted in an emailed statement that Clinton introduced her higher education plan more than a year ago.
“The promises [Trump] has made so far are as empty as the promises he made to students at Trump University,” he said. “There is only one candidate in this race with a real plan to make college debt-free and provide relief for millions of borrowers, and it is not Donald Trump.”
Published at Fri, 14 Oct 2016 17:42:29 +0000
