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Explaining the student debt crisis and what Dem candidates propose doing about it

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The plan highlights

  • Student debt has surged in recent years and now stands at over $1.6 trillion.
  • Some Democrat candidates are proposing tuition-free public college and canceling student debt, while others are offering more limited benefits.
  • Critics say many of the initiatives would benefit disproportionately better-off Americans.

What the candidates (including Trump) are proposing

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Over the last four years, college affordability and student debt have taken on a bigger role in presidential politics, but how to deal with the problem is still a contentious issue among the candidates in 2020.

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Just about every Democrat running for president has endorsed one of a variety of plans to make at least some public colleges or technical schools tuition-free or debt-free. All have proposed ways to reduce or even cancel student debt.

Public higher education institutions are run by state and local governments, and the federal government is limited in how much it can affect their decisions. A plan by Sen. Bernie Sanders, I-Vt., would have the federal government pay two-thirds of the cost of free tuition (about $47 billion per year, according to his office's estimate) and put states on the hook for the remaining third.

To collect the funds, states would have to pledge to eliminate tuition and fees while maintaining their current funding levels for education. Sen. Elizabeth Warren, D-Mass., has put forward a similar plan. Of course, it's possible some states would choose not to participate.

Other candidates have proposed different approaches. Several, including Sens. Cory Booker of New Jersey, Kamala Harris of California and Warren are signed onto a bill that would provide 1:1 matching funds to states that commit to use the money to pursue "debt-free" public college for students to help them graduate without taking on loans. Still others like former Vice President Joe Biden have backed making college tuition-free, but only for two-year community colleges, an idea President Barack Obama proposed.

On student debt, Sanders and Warren again represent the left flank of the party. Warren put out a means-tested plan to cancel up to $50,000 in student debt per individual. Households making as much as $250,000 could qualify for at least some debt cancellation, which would cover 95 percent of student debt holders by Warren's estimate and wipe out all loans for 75 percent of student debt holders. Sanders has gone even further, proposinga wholesale elimination of all $1.6 trillion in student debtat once, financed by new taxes on financial transactions. Warren estimates her plan would remove $640 billion of debt.

Politics

Other candidates have proposed more limited changes to student debt, like allowing people to refinance loans at lower rates or putting new limits on how much needs to be paid back each month as a share of their income.

Many Democratic candidates also have proposed making it easier to discharge student loans in bankruptcy proceedings, where it's harder to eliminate in comparison to other kinds of debt. Some, like Pete Buttigieg, the mayor of South Bend, Indiana, have called for allowing students to eliminate debt by working in public service. Former Rep. Beto O'Rourke of Texas has called for canceling all student debt held by public school teachers. Harris has a plan to allow people who start a business in underserved communities to eliminate their debt.

What supporters of tuition-free college/canceling debt say

Americans looking for work are stuck in an increasingly difficult spot: To obtain many high-paying jobs, they need a college education or technical degree, but the costs of education are rising and total student debt has more than doubled over the last decade.

This situation was made worse by the Great Recession, which forced many state governments to cut education budgets and raise tuition at public colleges and universities to make up for a decline in tax revenue. With job opportunities more limited during the recovery, many students were saddled with a combination of high student debt and relatively low wages.

Supporters of a one-time mass cancellation of student loans argue that these circumstances created a unique buildup of debt that is preventing younger Americans from buying a home, having children or starting new businesses. By removing the burden, they argue, these groups would be free to spend more and boost the economy. Older Americans, who are increasingly affected by student debt, would also have an easier path to retire.

"What folks need to understand is that there have been some major policy mistakes," said Sara Goldrick-Rab, professor of higher education policy and sociology at Temple University and an advocate for tuition-free college and debt cancellation. "It's led to a lot of people being in bad shape."

Proponents of debt cancellation have also made the case that it would help close the racial wealth gap in America, since black and Latino households are disproportionately affected by student debt and college costs. Many of the candidates also propose boosting funding for historically black colleges and universities and minority-serving institutions.

Even as many college graduates are struggling, though, the overall benefits of higher education are still clear. Workers with college degrees on averageearn higher wages and are less likely to be unemployed than those without them.

Because higher education has become a prerequisite for so many good-paying jobs, proponents of tuition-free college say it should be treated similarly to K-12 education as a public right.

Applying the benefits broadly across a wide range of incomes will reinforce that idea, they argue, and help build political traction with middle-class voters who might object to spending exclusively on low-income households. It will also free up existing state and federal aid to provide additional help to low-income students with costs besides tuition, such as housing, making it more likely they'll be able to attend and graduate.

What do critics of the programs say?

Critics of tuition-free college and broad student debt cancellation argue that the benefits will flow to too many Americans who are relatively well off and that the money would be better spent on more vulnerable groups.

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Sen. Amy Klobuchar of Minnesota summed it up in the second Democratic debate, saying, "My problem with some of these plans is they literally would pay for wealthy kids, for Wall Street kids, to go to college."

Klobuchar has called for financing tuition-free two-year degrees, which would be more likely to attract lower income students looking to improve their job prospects. Proposals for debt-free college also touch on this split, since wealthier families would presumably require less aid or none at all to limit their loans.

Students with extremely high debt — $100,00, $200,000 or even more — would benefit the most in raw dollars from proposals by Sanders and Warren to eliminate large swaths of student debt at once. But they may be the least in need of that assistance, since they tend to be graduates with advanced or professional degrees, which account for 48 percent of all student debt.

A graduate with $150,000 in debt after attending an Ivy League law school may look bad on a balance sheet, but their long-term outlook tends to be far better than a worker who is struggling to pay off a few thousand dollars of debt after dropping out of community college.

There's also growing concern thatAmericans without a college degree are becoming more disconnected from the economy and more vulnerable to health problems, addiction and suicide. Some candidates have suggested that investing trillions in free tuition/debt cancellation programs could divert funding and attention from these workers.

"We can't give everyone money so it's a question of to whom we give that money," said Sandy Baum, a senior fellow for the Center on Education Data and Policy at the Urban Institute discussing mass debt cancellation. "If you didn't go to college, you don't get money. If you went for a little while and borrowed a little, you get a little money. But if you went a long time and got a good degree, you get $50,000."

Politically, some candidates like Buttigieg have argued that a one-time debt cancellation would be unfair and stir resentment among people who did not benefit from loan cancellation, either because they had already paid off their debt or because they had missed the cutoff and were still in school.

Democrats who have raised these concerns have gravitated around more targeted benefits, like refinancing student loans at lower rates or further limiting how much students are expected to pay each month as a portion of their income.

President Donald Trump has also put forward another approach, with the White Houseproposing rulesaimed at preventing students from taking out more student loans than they can afford while also consolidating repayment options to make the process less confusing. Critics argue the plan could close off low-income students from pursuing advanced degrees that require greater loans.