Hillary Clinton’s $350 billion dollar proposal to make college debt-free for students is intended to get the candidate attention. It’s also intended to help her keep increasingly restless college and millennial voters in the Democratic camp next fall.
Some credit the proposal for being bold — $350 billion is certainly bold. In my view there is a fine line between bold and impractical. $350 billion? Where does the money come from when we simply don’t have it? Just a reminder, according to the CBO, the US government budget deficit in FY 2014 was $486 billion. And in case we get that addressed, we have a federal debt of $18.3 trillion. If it’s hard to get your mind around those numbers, that’s about an average debt of $154,000 for every taxpayer in the United States. Those numbers by themselves should be enough to end the argument. Unfortunately they haven’t.
Clinton’s plan has three major flaws.
First, college debt is a problem. However, providing federal grants to students so they don’t have to take out loans is not the solution. Clinton’s proposal merely shifts the burden of college costs from families to taxpayers and offers students better loan repayment options. The plan also requires increased higher education spending by states to qualify for state grants (Wouldn’t the increased spending also likely drive up costs?). In addition Clinton’s proposal caps the value of itemized deductions that wealthy families can claim on taxes – a tall order for a Congress dominated by Republicans.
Secondly, Clinton’s plan will likely improve college enrollment. It does nothing however to improve the graduation rate. Six years after beginning college only 60 percent of college students have graduated. Without improvement in graduation rates, the numbers in Clinton’s plan will only get worse. The plan only throws more money at colleges where too few graduate.
Finally, Clinton’s plan also ignores a fundamental fact: if you subsidize the cost of something, you get more of it. You drive up demand and eventually the price. Forty plus years of generous federal student financial aid has proved that point. Despite billions in federal financial aid, college is unaffordable for the vast majority of Americans. Federalizing higher education in the name of affordability, will only drive up college costs. The same arguments were made in the 1980s and 1990s.
Earlier this year President Obama introduced a plan to make community college free to all students. It’s a plan with many problems and built on flawed assumptions and funny math. Hillary Clinton’s proposal is a broader stroke that tries to address many of the same issues without addressing any of the plans major flaws.
Let’s hope Clinton’s plan has the same fate.