With the publication of the Republican Party’s official platform and the nomination of Donald Trump as the party’s presidential candidate, a clearer picture is emerging of how a Trump administration would approach higher education and student loans.
While Trump has still not put forward a detailed plan of his own, it’s clear that his approach would differ in many ways from proposals outlined by Democratic rival Hillary Clinton.
Clinton has promised to help those who already have student loan debt refinance it at lower rates, and make it possible for those pursuing degrees at public colleges or universities to graduate without taking on any student debt — undertakings that would require Congress to sign off on significant, taxpayer-funded spending increases.
Trump has said in the past that he’s sympathetic to the plight of student loan borrowers and would be open to government-backed refinancing programs like those proposed by Democrats. But there’s no such plank in the Republican Party platform.
The philosophy on higher education put forward in that document emphasizes the private sector and innovation as tools for curbing costs, calling for “new systems of learning to compete with traditional four-year schools: Technical institutions, online universities, lifelong learning, and work-based learning in the private sector.”
Government’s role in student loans
The Republican Party platform also states that the federal government “should not be in the business of originating student loans. In order to bring down college costs and give students access to a multitude of financing options, private sector participation in student financing should be restored.”
In an interview with Inside Higher Ed published in May, Trump’s campaign co-chair, Sam Clovis, said the candidate was working on a plan to revamp the federal student loan system, that would give responsibility for making loans back to private lenders, and require that colleges have “skin in the game” to ensure that students don’t take out more than they can reasonably repay.
“We think it should be marketplace and market driven,” Clovis said.
But it’s important to note that Republicans aren’t saying the government should get out of student lending altogether — they’re just calling for government to stop originating student loans, and for private sector “participation” in student financing.
As Brookings Institution fellow Susan Dynarski points out in an editorial today, the government’s original role in student lending was to guarantee payments on loans made by private lenders. Government guarantees of student loans made it possible for students who lacked the income and credit history to qualify for a traditional loan to take out loans to pay for their education.
But some felt that this system let private lenders reap easy profits while leaving the government on the hook for risk. The government started making direct student loans in the 1990s, and in 2010 ended federal guarantees of loans originated by private lenders. Most private student loans today, Dynarski notes, are cosigned by a parent, relative or friend.
But Dynarski says it’s a myth that the original public-private student loan system was competitive and helped hold down tuition costs, or that the expansion of federal direct student lending is the cause of spiraling higher education costs.
“There is a lot wrong with our student loan program: the repayment system is a mess, default rates are high, and vulnerable students are defrauded into borrowing by scam colleges. These are serious problems that call for serious solutions,” Dynarski writes.
But the Republican Party’s call to get government out of student lending “is not serious policy,” she concludes. “It’s as absurd as demands for government to keep its hands off Medicare.”
Encouraging innovation without getting scammed
A report out this week from the White House Council of Economic Advisers details problems encountered by students who borrowed relatively small amounts to attend non-selective colleges and for-profit schools, but didn’t get skills or a degree that boosted their job prospects.
It’s those students — rather than students who take on five-figure debt to earn a university degree that boosts their earning power — who are most likely to default. Borrowers with loans of less than $10,000 account for nearly two-thirds of all student loan defaults, the report noted.
In order to accept students using federal student loans to finance their educations, for-profit schools must be accredited. The problems many of their students are facing in the real world have raised questions about the claims schools made about the success of their graduates, and their ability to obtain accreditation.
To encourage “new modes of higher education delivery,” Republicans say accreditation should be “decoupled” from federal financing. The party’s platform calls for empowering states “to allow a wide array of accrediting and credentialing bodies to operate. This model would foster innovation, bring private industry into the credentialing market, and give students the ability to customize their college experience.”
Clinton claims she’d “encourage and reward innovators who design imaginative new ways of providing valuable higher education to students while driving down costs,” while simultaneously cracking down on “abusive practices of for-profit colleges that defraud taxpayers while burdening students with debt for educational programs of no value,” echoing recent moves by the Obama administration.
A position page on the Trump campaign’s website lacks any higher education policies. A page featuring videos in which the candidate speaks his mind on a number of issues includes a defense of Trump University, a non-accredited company that offered seminars in real estate investing that’s been hit with class action lawsuits by former students.
Trump has also said he doesn’t think the government should be making money on student loans and thinks that colleges and universities should have “skin in the game” by sharing some of the risks that students face when taking out a loan.
House Republicans: ‘Less red tape and less money’
Another glimpse at how Republicans lawmakers might approach higher education during a Trump administration comes from a budget proposal put forward by House Republicans. Students who qualify for need-based federal direct subsidized loans currently don’t pay interest on those loans until after they leave school.
House Republicans proposed eliminating that subsidy, which would save taxpayers an estimated $27 billion over 10 years, The Hechinger Report’s Mikhail Zinshteyn writes. That money would have come out of the pockets of low-income students, and the proposal was not included in the version of the budget bill that emerged from the House Appropriations Committee. The bill approved by the committee would cut funding for Pell grants by about $1 billion a year.
The Hechinger Report sums up the attitude of Congressional Republicans toward higher education as “Less red tape and less money.”
While critics have raised doubts that lawmakers would agree to foot the bill for Clinton’s higher education proposals, there have also been questions about fairness. Reaction to the candidate’s proposal to provide deferments and limited forgiveness of student loan debt for entrepreneurs had her campaign scrambling to defend it, TechCrunch’s Kate Conger reports.
“If anyone should get loan forgiveness, it’s not ‘innovators’ who go on to earn high incomes, but those who never earn a high income,” New America’s Alexander Holt wrote in an editorial for Inside Higher Ed. “And it shouldn’t be for college graduates who start a business in a ‘distressed community,’ but for borrowers who went to predatory schools and can’t find work. Those are the truly distressed.”
Clinton staffers were quick to clarify that the proposal was to provide deferments to anyone who starts a new business — not just tech entrepreneurs launching new startups, Conger says.
Matt Carter is the editor of Credible news. James Walsh contributed to this report.