Written by Rachel Levine
The presidential candidates in this election cycle are attempting to appeal to millennials by talking about a problem college students know all to well: student debt.
Some Democratic candidates support free college for all, while some Republican candidates suggest eliminating student debt through market-based solutions. Although it seems like all candidates are addressing college affordability, only a handful of candidates actually have official positions on the subject.
On the campaign trail, Republican Jeb Bush praises the “Tennessee Promise” program, which makes the first two years of community college free. While the former Florida governor has not yet published an official position on student debt or college affordability, it is expected that he will within the next month.
Republican Marco Rubio, Senator from Florida, has already offered his official position on his campaign site and in his book, American Dreams. A chapter titled “Making College A Good Investment Again” describes the student debt problem, and presents Rubio’s market-based proposal to make college a good investment.
Rubio’s plan would encourage investors to pay upfront for students’ education and then collect returns on their future income. In this way, Rubio believes, the supply and demand for certain college majors would help influence – and ideally prompt – investment decisions.
For example, a hedge fund might pay for the education of three students majoring in business, four in engineering, two in pre-law majors, and one in art studies. Bundling these investments could potentially lower the risk while securing a greater return for the hedge fund. Students would simply agree to pay the investor a certain percentage of their income for a certain amount of years, perhaps 4% of income over the next 10 years.
Opening up the market to investors also offers the advantage of alleviating the market failure of asymmetric information, which could promote greater ROI potential for students and their families when it comes to choosing colleges and majors. Rubio wants to make sure prospective college students and their parents would have more access to information like graduation rates, post-graduation earnings, and likely employment outcomes. With investors making investment choices on exactly these criteria (they want to maximize their returns), equipping college goers with the same information bridges the gap of what students expect in the future in terms of employability versus what the market calls for.
By contrast, Democrat Hillary Clinton’s college affordability plan calls for more direct government funding. Estimated to cost $350 billion over ten years, the former U.S. Secretary of State’s plan would reduce public university tuition through federal funding. If a public university promises students will not take out loans to finance tuition, it would receive the additional federal funds.
Clinton’s “New College Compact” does not directly tie funding to student graduation rates, but instead provides funding for preventative measures such as “student support, quality child care, partnerships with early childhood providers, emergency financial aid, and other interventions proven to boost completion.” Building off President Obama’s current plan, community college will be entirely tuition-free for students (and paid for by wealthy American’s tax dollars).
Clinton’s plan is not innovative and just extends the Democratic ideal that the government should pay at the expense of the taxpayers. Her “New College Compact” is a less socialist version of Senator Bernie Sanders’ “College For All” plan.
The candidate from Vermont would eliminate tuition at public universities by imposing a tax on Wall Street, initially providing a hefty $47 billion a year to fund colleges. If college is free, it is likely that public universities could see an influx of students who would overburden their resources, making colleges less efficient. Sanders’ plan would seem likely to lead to a tragedy of the commons since it forces colleges to reduce costs while accommodating a larger population.
Both Rubio and Clinton believe in a universal income based repayment plan for student loans. They actually have similar language on their websites’ Issues pages indicating, to some extent at least, that both parties are borrowing ideas from one another to come up with the best solution for this ballooning problem. Sanders did not mention any repayment plans because, under his plan, there would be nothing to pay back.
The biggest divide between Republican and Democrat solutions to college affordability is that one party keeps in line with the status quo by throwing more money at the problem, while the other is coming up with disruptive solutions. Rubio outlines his belief by saying, “Yesterday’s leaders want to raise taxes and dump more money into this broken system.”
While the Democrats’ plans would not target students going to NYU, one of the most expensive private universities, it would help more students go to public colleges and universities. But these plans do not go far enough in making colleges compete with each other to become more innovative in the ways they teach, offer career planning services, and propel students to be more efficient members of society once they have graduated.