How to Make Higher Education More Affordable

A look at what presidential candidates are proposing to address the issue

The cost of college in America today conflicts with a deeply held belief that higher education should not be the exclusive preserve of the upper-middle class and the wealthy.

The presidential candidates have their remedies. Bernie Sanders and Hillary Clinton have both outlined proposals to promote access to traditional college programs. The Republicans are more open to radical changes in education that (they say) will lower costs.  As the campaign wears on, reporters will cover particular proposals from each. But what’s the big-picture vision on offer from each camp?

Hillary Clinton’s approach is to make college debt-free for those who attend in-state public schools. For those at private schools, Clinton still would rely heavily on loans, but at better terms than those now prevailing. Interest rates would be lower, and “income-based repayment” plans, or IBRs, would be streamlined. Clinton would cap payments at 10 percent of income per year, and forgive all accumulated debt 20 years after graduation. (This is weak compared with Canada’s approach of allowing defaults on student-loan debt, via bankruptcy, seven years after graduation, but it would be a vast improvement over the status quo.)

Why the focus on IBR? Under President Obama, the income-based repayment program has not been administered effectively. Arduous requirements for enrolling (or outright misinformation from servicers) have shaken students’ confidence in the program. A maze of complex options can confound even the smartest borrowers. Even worse, some commentators are using the existence of IBR to justify harsh treatment of student loans in bankruptcy, even though it  could hit some borrowers with a large tax penalty (and unknown risks to credit scores) in the future. If education-finance-reform moderates do not substantially improve the terms and accessibility of IBR, the program will lose credibility as a compromise between drastically reduced federal aid for education and much more comprehensive federal support.

Bernie Sanders’s plan for higher education offers the latter option, promising to tax Wall Street to pay for more and better college instruction. He aims to “eliminate undergraduate tuition and fees at public colleges and universities,” and would cut student-loan interest rates in half, in order to better reflect the government’s low cost of borrowing. Like Clinton’s plan, Sanders’s would require states to maintain their spending on higher education.

For many Republicans, state spending on education is not the solution to college costs—it’s part of the problem. While each legitimate presidential candidate has some kind of education plan, the spotlight now is on Marco Rubio’s.  Inside Higher Ed calls him the “the lone GOP candidate talking about higher ed.” However his presidential campaign turns out, Rubio is likely to influence the GOP’s education policy proposals in the legislative and executive branches over the next decade.

Rubio proposes cheap (if untested) online-education programs as vital to higher education’s future. He has also embraced “human capital contracts” as an equity-like alternative to student debt: Rather than paying interest on loans, students with such contracts would promise a share of their future income to investors. Those who would earn the most would likely pay the lowest percentage of income, while those in lower-paying jobs would be likely to sacrifice much higher shares of their pay. (Such a policy mirrors in private finance what regressive Republican tax plans would accomplish in public finance.)

So as election 2016 approaches, there are clear differences between the parties. Candidates such as Rubio would make college accessible by redefining both “college” and “access” in cost-cutting and revenue-maximizing ways. Sanders and Clinton, on the other hand, want to make substantial investments in extant universities. Ultimately, their cautious and careful approach better reflects the enormous value higher education creates for both students and society as a whole. Federal policymakers driven by a return-on-investment frame for spending and student-loan programs would do well to recognize how much colleges already contribute to human capital.

State and local officials also have a role to play. As private lenders cherrypick the best credit risks to refinance, federal programs are going to be stuck with the riskier borrowers. That could lead to higher interest rates on federal loans, to make up for income-based repayment expenses, or defaults. Both state and county governments can step in to ease the burden by offering better loan terms than the feds, or refinancing to those neglected by private lenders.

Additionally, states have dramatically cut back their support for higher education. Federal funding—whether for direct scholarship programs or indirectly in the form of federal credit programs—must fill the gap left by the states, lest millions of individuals qualified for higher education end up excluded from it.