Student Debt Is Hot Topic for 2016 Field

new atmBy Douglas Belkin

Republicans focus on driving down tuition prices, Democrats on pumping more federal funds into public universities

Student DebtThe rise in college costs—and student-loan burdens—is breaking through as a hot issue in the 2016 presidential race as contenders float proposals that rethink what college should cost and who should foot the bill.

Republicans, who generally point to easy access to federal student loans as the culprit inflating the price of higher education, are focusing on driving down tuition prices and creating alternative pathways to degrees. Democrats are concentrating on pumping significantly more federal money into public universities to reverse years of state budget cuts.

The debate comes amid rising concern about the cost of higher education. In April, a Gallup poll found that only 21% of Americans view higher education as affordable. Another Gallup poll found that 73% of parents with children under the age of 18 are worried about paying for college.

The idea of a massive infusion of federal cash to guarantee “debt-free college” gained traction this week when presidential hopeful Hillary Clinton told reporters in Iowa it was critical to “move toward making college as debt free as possible.”

On Tuesday, Sen. Bernie Sanders, a Vermont independent who also is seeking the Democratic nomination, introduced legislation that would eliminate undergraduate tuition at public four-year colleges and expand work-study programs to help students at private universities. Mr. Sanders estimates the plan would cost $70 billion a year and would be partially paid for by a tax on financial transactions.

GOP presidential hopefuls have approached the issue by focusing on the price tag. In 2011, Rick Perry, then governor of Texas, began calling for $10,000 undergraduate degrees, a challenge that some colleges heeded.

Last month, Sen. Rand Paul (R., Ky.) told reporters in Iowa he wanted to enable college students to deduct the cost of education during the course of their careers.

UTAustin_logoSen. Marco Rubio (R., Fla), who has called for the government to back new, less costly routes to postsecondary degrees, also has introduced legislation that would allow private investors to cover the cost of college for students in exchange for a percentage of their future earnings. Such income-share agreements are popular in South America.

The issue resonates beyond the 2016 field. Sen. Lamar Alexander (R., Tenn.), who heads the health and education committee, has suggested schools should have more “skin in the game” by being held financially accountable for students who are unable to pay back their loans.

Mrs. Clinton’s choice of words in Iowa was a victory for the progressive wing of her party, which began championing the concept after left-leaning think tank Demos floated the idea in September. A paper from the group calls for the federal government to kick in about $30 billion to partly match state funding for higher education.

Progressives received a boost in April when three senators, including Elizabeth Warren (D., Mass.), introduced a resolution calling for debt-free college and highlighting the 300% increase in public college costs from 30 years ago.

The backdrop is a broader debate between baby boomers and millennials. Boomers graduated from college with little or no student debt and oversaw a significant drop in spending on public higher education.

Now, nearly three-quarters of college graduates have student debt; the average is about $35,000. This year’s class will be the most indebted ever.

“This is the first generation we’ve saddled with this kind of debt and frankly we don’t know what the consequences will be,” said Mark Huelsman, a senior policy analyst at Demos and the author of the paper championing debt-free college. “I think you’re seeing an entire generation, the millennial generation, for whom this is the most acute financial issue they’re facing.”

President Barack Obama helped set the stage for the student-debt debate with a January proposal to make community-college tuition free for every American. He hoped to cover part of the cost by scrapping the tax deductions for 529 college saving accounts, but Democrats attacked that idea and he dropped it.

In his first term Mr. Obama put in place a program called “Pay As You Earn” that allowed student-loan borrowers to pay 10% of their annual discretionary income in monthly installments. Borrowers who work in the public sector—a government agency or nonprofit—are forgiven whatever debt they owe after 10 years. Borrowers in the private sector generally have debt forgiven after 20 years.

Enrollment in those plans have surged during the past year, in part due to outreach by the Obama administration. That growth has raised concerns that the cost of those plans could drive up long-term expenses. The Brookings Institution, a centrist think tank in Washington, said in a report last year that the most popular plan eventually could cost taxpayers $14 billion a year.

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