Initiative before Congress aims to slash student debt

July 7, 2015
Occupy Wall Street demonstrators participating in a street-theater production wear signs around their neck representing their student debt during a protest against the rising national student debt in Union Square, in New York

Demonstrators wear signs around their neck representing their student debt during a protest against the rising national student debt in Union Square, in New York, April 25, 2012. REUTERS/Andrew Burton

For most of the 20th century, higher education wasn’t treated as a cash cow, and students were better off for it.

Consider: Thousands of college students recently had their school loans forgiven by the federal government. Few are celebrating, though. Washington stepped in to relieve students from paying a for-profit college that had defrauded them.

Corinthian Colleges, a chain of private universities, had been the target of class-action lawsuits and government investigations since 2004. It went bankrupt in May, not long after the U.S. Department of Education fined the company almost $30 million for lying to students about job-placement rates.  

But that’s just one settlement. We need a systematic approach to tackle the student-debt crisis. We can easily find one if we look in the not-too-distant past.

As recently as 1990, state governments and Washington all viewed higher education as a public good. The United States had a robust network of affordable state public universities, and students didn’t have to take on oversized financial — and emotional — debt to get a good education.

Students walk on the University of California Los Angeles (UCLA) campus

Students on the University of California, Los Angeles campus in Los Angeles. California’s university system is one of many state colleges that have faced decades of budget cuts. REUTERS/Lucy Nicholson

But due to sharp state budget cuts, as well as wage stagnation and the rise of predatory lending, the path to a degree has become far more difficult. As is the path to financial stability after graduation.  

Progressive members of Congress have now introduced a new debt-free college initiative, based on a blueprint from Demos and the Progressive Change Campaign Committee. It could, if passed, help all U.S. students graduate from a public college without accumulating a mountain of debt.

As the 2016 presidential campaign unfolds, students and their allies will be watching candidates to see where they stand on this key issue. Candidates, including Senator Bernie Sanders (D-Vt.) and former Secretary of State Hillary Clinton, are already talking about it.

Meanwhile, Senator Marco Rubio (R-Fla.) on Tuesday again talked about his plan for wealthy people or hedge funds to underwrite college education as part of a “student investment plan.” Students would agree to pay back a percentage of the loan once they have a job. Rubio and Senator Mark Warner (D-Va.) had already introduced a Senate bill last year focusing on loan repayment.   

Debt-free college means states would again fulfill their traditional role as education providers. At the moment, close to 75 percent of all college students are enrolled in public universities of some sort, up from about 50 percent in the mid-1960s. But just as American students began relying more on public universities, their prices have spiked.

The public higher-education sector saw strong growth throughout the 1970s and 1980s. In the past three decades, however, tuition has increased 250 percent. Almost 80 percent of these hikes, new research shows, are due to declining state subsidies.

State governments must go back to thinking that higher education is just about the best investment they can make in the future.

Obama speaks before he signs a presidential memorandum on reducing burden of student loan debt in White House in Washington

President Barack Obama speaks before signing a presidential memorandum on reducing the burden of student loan debt in the White House in Washington, June 9, 2014. REUTERS/Larry Downing

This recommitment to college affordability will also require a concerted effort from the federal government. With so many tight state budgets, Congress should pledge to cover 60 percent of the cost for states that commit to providing a debt-free education for low- and middle-income students.

The percentage of public-college tuition covered by Pell Grants has fallen by more than 40 percent since the 1970s. Here, too, the ball is in Congress’ court.

If the federal government took the step of increasing Pell Grant aid and indexing the grant’s value to the average in-state tuition cost, millions of students could reap the benefits.

The question U.S. leaders should be asking isn’t, “How are we going to pay for this?” but rather, “What happens if we don’t?”

We already know the answer. In 1993, the majority of U.S. college graduates did not have to borrow to pay for their education. Among those who did, the average loan was less than $9,500. Now, however, nearly 70 percent of bachelor’s degree recipients take on an average debt load of $30,000.  

The need to pay back this money has blocked many young people from entry into the middle class and from saving for homeownership and retirement.

This college-debt boom has taken a particular toll on students of color or with low incomes — those often in the greatest need for upward mobility. For bachelor’s and associate’s degrees, 81 percent and 57 percent of black students go into debt, respectively, compared to 63 percent and 43 percent of white students.

In the for-profit college sector, African-Americans and Latinos make up nearly half of students. Yet these schools graduate the lowest percentage of students of any education sector — and saddle them with the most debt, $40,000 on average.

This is not sustainable. Governors have already recognized the problems these high college costs can create. It is undermining their states ability to train and retain a skilled workforce. President Barack Obama’s free community- college proposal was partially modeled on a program by Tennessee Governor Bill Haslem, known as tnAchieves. It gives students scholarships to cover any gaps in tuition for two years. The program has helped increase the number of lower-income students who enroll and, more important, earn a credential.

Debt-free education isn’t a radical new proposal. It’s a return to the more equitable system that previous generations enjoyed.


We welcome comments that advance the story through relevant opinion, anecdotes, links and data. If you see a comment that you believe is irrelevant or inappropriate, you can flag it to our editors by using the report abuse links. Views expressed in the comments do not represent those of Reuters. For more information on our comment policy, see

“I spent $62,000 on a comparative literature degree, and now I work at Starbucks. What should I do?”

Some problems are predictable. Like…. REALLY predictable. Study something of consequence. Save the fun stuff for a hobby.

Posted by Solidar | Report as abusive

Like Solidar, the students who opted for majors akin to comparative literature boarded a trolley only to find out that they would step off a bullet train. Time for all, young and old alike, to move on to today’s reality. Which reflects both the need to assess risk return AND to resist the allure of the refrain from “Yesterday.”

Posted by Heyoka | Report as abusive

Previous generations paid for college themselves, because college was comparatively cheap.

Now, due to loads of Federally guaranteed financing options, college costs have skyrocketed… just like Healthcare, or anything else that has 3rd parties bearing the majority of the cost.

If ‘consumers’ (students) were in the position to decide how much a college degree is *worth*, they’d make better decisions about where to spend their money and what to study.

Instead, taxpayers finance millions of people to attended adult-playskool where they learn nothing of marketable value to employers.

Get government out of higher-education entirely, and you’ll end the problem of “out of control” student debt.

Posted by BBERDUDE | Report as abusive