Hillary Clinton's plan to help student-loan debtors is baloney. Bernie's plan shows promise.

Bernie Sanders is breathing down Hillary Clinton's neck in the New Hampshire primary election, and suddenly she's become the college student's best friend.  But her plan to help college students pay for college falls far short.

Essentially, she has cobbled together a host of  small-ball ideas and plans to spend $350 billion over the next ten years, using most of the money to encourage state governments to offer more affordable college options. And she also wants to lower student-loan interest rates and expand long-term repayment programs.  Don't worry, Harvard and University of Phoenix. You'll still get your cut.

All the leading presidential candidates know that young people are worried about college costs and student loans, and they've all proposed plans that will supposedly help relieve the financial burden on  college students.

But no plan is worth anything unless it addresses the suffering that students and former students are experiencing right now.  A good reform plan must contain these elements:

• Kick the for-profit colleges out of the federal student loan program.
• Amend the Bankruptcy Code to allow distressed student-loan debtors who acted in good faith to discharge their loans in bankruptcy.
• Abolish unconscionable fees and penalties on student-loan debt.
• Stop garnishing Social Security checks of elderly people who defaulted on their student loans.
• Stop pushing borrowers into 20- and 25-year repayment plans.
• Stop lending money to allow people to enroll in overpriced postsecondary programs that will never pay off---law programs at third-rate schools, overpriced MBA programs, overpriced liberal arts degrees, overpriced online programs, etc.

Has Hillary talked about any of those things? No she has not. Her proposal takes care of her key constituents--the pompous, lazy, and overpriced college industry. It doesn't do anything for the  millions of  people who can't pay back their loans.

Bernie Sanders, on the other hand, has proposed a simple plan that will address at least some of the issues I identified. He basically proposes to offer everyone a free four-year college education at a public college. Vassar College president Catherine Hill said in a New York Times essay that  she opposes this idea, which she says will cost about $30 billion a year.

But that's cheaper than Hillary's plan.

And here's the beauty of Bernie's scheme. If everyone could go to college free, no one would enroll at a for-profit college; and these sleazy institutions would have to close their doors.  That's a big plus.

Moreover, private colleges like Vassar would probably have to lower their tuition. Few people would borrow a quarter of a million dollars to go to a fancy private school if they could enroll in a good state university and pay nothing. No wonder Vassar's president opposes the idea.

And if college is free, people won't be borrowing money to go to college. They won't run the risk of default, of paying huge default penalties, or of being driven into 25-year repayment plans.

So what's not to like?  Especially when you consider that the government is spending $165 billion a year right now on the federal student loan program, which is nothing but a train wreck.  Bernie's idea may seem hare-brained, but it is actually the only proposal put forward by any of the presidential candidates that makes sense.

Bernie's plan won't solve the student-loan crisis completely. About 40 percent of student-loan money is going for graduate education. We've got to get tuition costs down at the law schools, the business schools, and all the professional schools. We've got to quit turning out too many lawyers, veterinarians, and MBAs.  And we've got to forgive the student-loan debt that has buried millions of people.

But Bernie's plan is a start. It will at least deal with the student-loan crisis at the undergraduate level.

References

Mitchell D. Weiss. What's Missing From Clinton Student Loan Plan. USA Today, August 15, 2015. http://www.usatoday.com/story/money/personalfinance/2015/08/15/credit-dotcom-hillary-clinton-student-loan-plan/31456547/

New York Times essayists argue for subsidized food, housing, and transportation for college students. Well, why the hell not?

Sara Goldrick-Rab and Katharine M. Broton argued in the New York Times today that federal poverty programs should be expanded to include college students. Some college students are homeless, the authors point out, and one in five reported in a recent survey that they had gone hungry at least once in the previous 30 days due to lack of money.

This is the second vacuous essay published in the New York Times over the space of less than a week about the cost of higher education and what to do about it. Just a few days ago, Vassar's President Catharine Hill argued against Bernie Sanders' "College For All" proposal to allow people to attend a public four-year college for free. Hill said the solution to the high cost of higher education is better counseling and long-term repayment plans.

If I were grading President Hill's essay, I would give it a C- and scribble "trite and unoriginal!" in the margin of her paper in bold red ink. If I were grading Goldrick-Rab and Broton, I would assign them a failing grade but give them the opportunity to resubmit after doing a little research.

Yes, there are homeless college students--about 50,000, according to one report. But at least some of those people were unscrupulously recruited by colleges who just want their Pell Grant money and the proceeds from their student loans. Do we really want to expand the federal school-lunch program to deal with those people as Goldrick-Rab and Broton propose? Shouldn't we just help homeless college students in the same way we help all homeless people?

Currently, the U.S. government is spending about $165 billion a year on various student-aid programs, including loans, grants, and campus work-study jobs. And the government gives food stamps to 52 million people, including some college students. Isn't that enough?

Interestingly, neither Vassar's Hill or Goldrick-Rab and Broton (from the University of Wisconsin apparently) offered any serious plan for reducing college costs. Hill said vaguely that students need longer repayment plans to pay their tuition bills and the Wisconsinites didn't offer any suggestions at all.

Higher education is a great business isn't it? The universities can jack up their tuition as high as they like, knowing the students will simply borrow more money to cover their fee bills.  Who cares if the saps can't repay their student loans? "Not my problem" is the higher education industry's stance.

And when the public wakes up to the fact that the cost of going to college is out of control, who does it turn to for answers? People like Catharine Hill, Sara Goldrick-Rab and Katharine Broton--lackeys of the institutions that created the problem. And the New York Times, which doesn't really give a damn about the student-loan crisis, obligingly prints these dopes' essays on its op ed pages.

Sara Goldrick-Rab wants to expand the school-lunch program to include college students

References

Sara Goldrick-Rab and Katharine M. Broton. Hungry, Homeless and in College. New York Times, December 4, 2015, p. A33. Accessible at: http://www.nytimes.com/2015/12/04/opinion/hungry-homeless-and-in-college.html

Catharine Hill. Free Tuition Is Not the Answer. New York Times, November 30, 2015, p. A23. Accessible at: http://www.nytimes.com/2015/11/30/opinion/free-tuition-is-not-the-answer.html?_r=0

Let's admit it: Bernie Sanders' "College for All Act" proposal has some good ideas

Bernie Sanders' "College For All Act" proposal: "That's not gonna happen."

In an old episode of The Walking Dead, an armed wacko asks Sheriff Rick if he and his buddies can join Rick's tribe of survivalists. "That's not gonna happen," Sheriff Rick rasps with his impeccable Georgia accent.  And then Rick shoots the wacko dead with his trademark service revolver.

Something similar might be said about Bernie Sanders' "College For All Act" proposal. That's not gonna happen. Nevertheless, Bernie has come up with some good ideas that are worth examining.

First, and most importantly, Bernie proposes free college tuition for Americans to attend 4-year public colleges or universities. That's a great idea and would actually cost Americans much less than we are spending now in federal student aid.

But, as I said in a previous blog posting, the for-profit college industry and the private non-profits are happy with the status quo and couldn't survive a week without federal financial aid. The only way Bernie's free tuition plan could work would be to shut down the present student-aid program, and that's not gonna happen. So Bernie's College For All Act is--as I said earlier--Dead On Arrival.

Bernie's college funding proposal has some other good ideas, however. Along with a lot of other responsible people, Bernie proposes a simplified Student Aid Application process. Last year, Senators Lamar Alexander and Michael Bennett proposed a FAFSA form that only has two questions.  Almost everyone agrees that the present Student Aid Application process is confusing and overly complicated, so we should listen to Bernie when he says the process should be simplified.

Bernie also proposes lower interest rates and an unlimited opportunity for students to refinance their student loans at lower interest rates. This is a great idea because, as a recent New York Times article made clear, it is the accruing interest on student loans, not the amount that students originally borrowed, that is crushing millions of student-loan debtors. The Times told the story of Liz Kelly, who borrowed about $25,000 to get an undergraduate degree and then borrowed more to go to graduate school. The total amount Kelly borrowed was less than $150,000, but she now owes $410,000 due to the interest that accrued while her loans were in forbearance or deferment.

Critics will say that lower interest rates and easy loan consolidation will cost taxpayers billions, which is true. But let's face it: The people whose loans have ballooned out of control due to accrued interest and fees will never pay the loans back anyway. Do you think Liz Kelly will ever pay off the $410,000 she now owes?

There is one huge caveat to Bernie's proposal to allow students to refinance their loans. There are now 41 million outstanding student-loan debtors, and many of them took out multiple loans. Allowing millions of borrowers to refinance their loans would create an administrative nightmare. In my opinion, it would make more sense to just forgive the interest on those loans or give overwhelmed debtors reasonable access to the bankruptcy courts.

But, as Sheriff Rick said to the armed wacko, "That's not gonna happen." Apparently, our national government would rather create a real-life class of The Walking Dead than take responsible action to give honest but unfortunate student-loan debtors some relief.

The Walking Dead: These folks will never pay off their student loans.

References

Lamar Alexander & Michael Bennett. An Answer on a Postcard. New York Times, June 19, 2014, p.  A25. Accessible at: http://mobile.nytimes.com/2014/06/19/opinion/simplifying-fafsa-will-get-more-kids-into-college.html?_r=0

Kevin Carey. (2015, November 29). Lend With a Smile, Collect With a Fist. New York Times, Sunday Business Section, 1. Accessible at: http://www.nytimes.com/2015/11/29/upshot/student-debt-in-america-lend-with-a-smile-collect-with-a-fist.html?_r=0

Bernie Sanders' proposal for free tutiiton at public universities could actually save taxpayers money. So why don't we do that?

Bernie Sanders has proposed free tuition at all American public universities. Let's look at that proposal and also examine the reasons why Bernie's scheme will never be implemented, even though it would cost taxpayers less money than they are spending now on student financial aid.

According to Catharine Hill, president of Vassar College, free tuition at the nation's public universities would cost about $70 billion, which is a lot of money.

But the federal government will distribute almost $35 billion  this year in Pell Grant funding to low-income students. If Congress closed the Pell Grant program and simply provided free tuition at public universities, half of the estimated cost of Sanders' plan would be covered by the switch.

Where would the other $35 billion come from?

In addition to Pell Grants, the federal government operates the federal student loan program, which will distribute more than $100 billion a year in college-loan money. About a third of that sum will be lost due to defaults It would actually be cheaper to provide every American with free tuition at a public university than to operate the federal student-loan program at $100 billion a year and the Pell Grant programs at $35 billion.  In fact, this change would save the federal government about $65 billion a year.

Why then don't we adopt Bernie Sanders' proposal?  Three reasons:

1) The for-profit college industry would collapse. Currently, the for-profit colleges get about 25 percent of all federal student-aid money. If the government stopped subsidizing the for-profit college sector, the for-profits would be forced to close because they get 80 to 90 percent of their operating revenues from federal funds. In fact, offering free tuition at public universities in lieu of the current student-aid system would shut down the for-profit college industry almost overnight.

This sleazy sector of higher education will never allow Bernie Sanders' plan to be operationalized. The for-profit colleges have made strategic political contributions to key congresspeople, and they own most of the lobbyists in Washington. For this reason, Bernie's free-tuition program is already dead.

2) Nonselective private colleges would collapse.  Bernie's free-tuition plan would also kill the nondescript private colleges. Why would anyone attend Malloy University on Long Island, Cabrini College in Philadelphia, or Pine Manor College in Boston if they could go to a state university for free? This sector of higher education will surely do everything it can to make sure Bernie's pipe dream never  becomes a reality.

3) Elite colleges and universities would suffer. Free tuition to attend a public university would not mean the death of Harvard, Yale, Vassar, Dartmouth, and the other elite private colleges. Most of them have large endowments that would keep them afloat even if the federal student-aid program was closed. Moreover, there will always be wealthy families willing to pay almost any amount of money for their children to attend an Ivy League school, even if the public universities were free.

Nevertheless, the Harvards and the Yales do quite well under the status quo. They certainly get a hefty financial boost from Pell Grant money and federal student-loan revenues.  Having a federal cash infusion allows then to jack up their tuition, because they know students will simply borrow more money to cover tuition hikes. When Catharine Hill of Vassar spoke out against Bernie Sanders' free-college plan in the New York Times yesterday, she was speaking not just for Vassar but for all the elite colleges.

Conclusion: Bernie's Free-Tuition plan is Dead On Arrival

In short, Bernie Sander's proposal to give everyone a free undergraduate education at a public college or university is DOA.  The for-profit college industry  and the non-profit private universities simply will not allow it.  These two groups own Congress, and they like the status quo.

Bernie's College-For-All plan: DOA

References

American Council on Education. The Status of Federal Student Aid Programs. Washington, DC: Author, 2015. Accessible at: https://www.acenet.edu/news-room/Documents/The-Status-of-Federal-Student-Aid-Programs.pdf

David Halperin. The Perfect Lobby: How One Industry Captured Washington, DC. The Nation, April 3, 2014. Accessible at:  https://www.thenation.com/article/perfect-lobby-how-one-industry-captured-washington-dc/

Catharine Hill. Free Tuition Is Not the Answer. New York Times, November 30, 2015, p. A23. Accessible at: http://www.nytimes.com/2015/11/30/opinion/free-tuition-is-not-the-answer.html?_r=0