Election Issues: Student Loans

Over the next few months, I will explain the finance and economic issues that are going to be important in the upcoming presidential election. In this issue, we will look at student loans, which are a very important issue.

College tuition has become increasingly expensive and many students and their families are finding that the only way many of them can afford college is with student loans. One of the biggest problems is that many students either struggle to find well-paying jobs after graduation, or even worse, many students wind up not being able to finish their education and then face the monumental task of trying to pay back their loans with earnings from jobs that pay barely more than the minimum wage.

The Obama administration helped many borrowers with the changes it implemented in repayment options for student loan borrowers. One of those was the income-based repayment program, which caps payments at a reasonable percentage (around 10%) after accounting for certain living expenses.

College tuition was a critical issue in the Democratic presidential primary, and the issue of free tuition at public universities and community colleges was hotly debated. Many young people see rising tuition as a barrier to their educational pursuits, and there are many students who have passed up the opportunity to go to college because of their concern about taking on a sizable amount of debt to complete their education.

Democratic nominee Hillary Clinton’s campaign website has indicated that her position is that she will aim to allow students the option to go to public universities in their state without having to pay tuition if they come from a family with an income of less than $85,000 a year (that amount rises to $125,000 a year in 2021). She also wants to see free tuition at community colleges.

Clinton’s campaign is also proposing additional options to help borrowers with repayment. These options would include deferment of up to three years for graduates who start a business, and help with getting into a repayment program (even for those borrowers who are presently delinquent or have defaulted on their loans). She also is proposing an immediate three-month moratorium to allow borrowers with federal loans to explore and apply for the different options available.

I did check Republican nominee Donald Trump’s campaign website and found nothing regarding any initiative or proposal on student loans. The Republican Party has in the past been very opposed to the federal government’s involvement in education and has indicated that it wants to get rid of all federal student loans, which would leave students with only the option of private loans if they needed to borrow for their studies.

This is an issue that affects everyone and is therefore important to consider. One of the reasons it has been difficult to make strong progress on student loans is that many of the politicians in office went to college at a time when tuition was low, and it was realistic to work in a part-time job and pay your tuition and expenses without taking on debt. Younger legislators, who are starting to get elected, are able to better relate to the plight of their constituents because they are also paying off student loans. They are able to examine the issue more seriously because they’re dealing with the same circumstances as the people they represent. Tuition is on the rise, and for many students, there are no other options than student loans to pay for their education.

In the next issue, we will look at the issue of small businesses.