Although the student debt crisis is front and center in the 2020 presidential debate—with plenty of plans to dig students out of debt—there has been shockingly little discussion as to why college is so expensive in the first place.
Today, The New Center—an organization focused on creating the space for a political center in today’s America—released a new policy paper entitled “The New American Dream: Alleviating the Student Debt Crisis,” with a comprehensive set of solutions to help students in debt now and to make college more affordable in the future.
Higher education has never been more important for Americans looking to get a good job. In 2018, college graduates earned weekly wages that were 80% higher than those of high school graduates. The U.S. is home to some of the best colleges and universities in the world, but the cost of attending them is burdening students and their families as never before. Increasingly, young people are pushing back many milestones of adulthood—like starting a family or buying a home—because they are buried under mountains of student debt.
The New Center Paper proposes several ideas to deal with both the burdens of student debt and the excessive cost of higher education.
How Should We Deal with College Debt Now?
- Income-Based Repayment Plans Need to be the National Standard
Today, some borrowers participate in the income-based Revised Pay as You Earn (REPAYE) plan, in which borrowers pay 10% of their discretionary income for 20 years REPAYE should be the default repayment plan, and the Department of Education should immediately convert all borrowers to it.
- Targeted Loan Forgiveness
An alternative approach to providing universal student loan is to target it to low-income students who are in most need of help. This program could forgive all student loans for individuals who qualify for and receive benefits from programs such as Supplemental Security Income (SSI), Supplemental Nutrition Assistance Program (SNAP), or Medicaid.
- Public Service Loan Forgiveness
The Public Service Loan Forgiveness Program (PSLF) permits direct loan borrowers to have the remainder of their loans forgiven if they work full-time for a qualifying public service job and have made 120 qualifying monthly payments (10 years worth of payments). However, only 1% of applicants have been approved for forgiveness by the loan servicers processing the applications. Rather than rewarding a narrow set of public service employees with loan forgiveness, a separate national service program could be authorized by Congress based on the Serve America Together Campaign.
How Do We Make College More Affordable in the Future?
- Keep Colleges Accountable for Raising Tuition
Washington can incentivize public universities to maintain lower tuition by using its influence over the federal student loan market. Colleges that increase their tuition faster than an index of inflation could lose access to federal student loans, or the colleges would have to pay for the overage in tuition prices themselves.
- Expand (And Reform) College Promise Programs Nationwide
America needs better solutions for graduating high school students who don’t want to go to a four-year college. One is the College Promise Campaign, a national nonprofit initiative that aims to make community college education free and accessible. Making several changes to the design of these college promise programs, such as eliminating strict eligibility requirements, would make both access and affordability a reality for students who currently don’t have the same opportunity to pursue higher education.
- Personal Financial Education for Every High School Kid in America
Most high school students aren’t financially literate and do not understand what a loan will mean for their long-term economic security. Given the general lack of knowledge about personal finance—and the negative impact this will inevitably have upon student’s lives—states and localities should make it a priority to ensure that every high school student receives a course in personal financial education.
- Increase the Maximum Federal Pell Grant Award
Federal Pell Grants are subsidies provided to students based on financial need and make higher education possible for seven and a half million Americans each year. The maximum Federal Pell Grant Award needs to be roughly doubled to close income gaps in access and attainment of a college education.
- Encourage Businesses to Provide Loan Repayment as an Employee Benefit
The Retirement Parity for Student Loans Act proposed by Senator Ron Wyden would permit retirement plans to make matching contributions to workers as if their student loan payments were salary reduction contributions. This proposal addresses the growing problem that many young people burdened by student loans aren’t able to invest in tax-protected savings vehicles like a 401(k), which are critical to achieving a secure retirement.