Hillary Clinton’s Student Loan Forgiveness Program

Hillary Clinton’s Student Loan Forgiveness Plan

The details are finally out on Hillary Clinton’s plan for student loan debt, and they aren’t all that appealing.

Officially titled the “Initiative on Technology & Innovation”, Hillary Clinton’s Campaign recently announced her pledge to offer Federal student loan forgiveness benefits to entrepreneurs and small business owners.

This initiative, however, makes no mention at all for average workers, or anyone else.

Hillary’s Initiative on Technology & Innovation

Hillary’s plan offers “innovators who start social enterprises or new businesses in distressed communities” up to $17,500 of forgiveness for Federal student loans, after they’ve made full, on-time payments for a period of at least 5 years.

What does it mean to operate in a “distressed community”, or to be a “social enterprise that provide[s] measurable social impact and benefit”? Unfortunately, no details have yet emerged regarding these definitions, and since we’ve been burned in the past by similar promises from other politicians, I’m fairly skeptical that the eligibility criteria will be easy to meet here.

To me, Hillary’s plan for dealing with student loans sounds similar to the old Obama Student Loan Forgiveness Program, except that it’s narrowed the eligibility criteria even further than his initial proposal did, making it impossible for the vast majority of people with real student loan problems from being able to take advantage of the benefit.

And that’s not a good sign of things to come. My fear is that if Hillary is elected President, we’ll see 8 years of inability to tackle the student loan debt crisis in a way that’ll move the needle at all. Perhaps we shouldn’t be surprised by that though, considering that her most important supporters are the big banks themselves.

Other Student Loan Benefits Within Hillary’s IT&I Plan

Also included in Hillary Clinton’s Initiative on Technology & Innovation is a promise to help young entrepreneurs get their businesses off the ground without having to waste their limited capital on paying back student loans.

Her plan proposed to provide recent graduates who qualify as entrepreneurs with up to three years of Federal Student Loan Deferment benefits, so they’re able to ignore the monthly payments and keep their funds focused on building new businesses, hopefully “driv[ing] the innovation economy”.

The nice thing about this part of her plan is that it does include some details, and appears to offer these entrepreneurs a new special kind of deferment status where no interest or principal payments will be required “during the start-up phase” of their business.

And to be fair, my initial and immediate negative reaction to her proposed plan was tempered slightly after I clicked through to the view the plan’s official Fact Sheet, and read that she also promises to “explore” a similar deferment incentive for early joiners of start-ups, “such as the first 10 or 20 employees”, which would certainly help make her deferment benefits more widely available.

However, again, there’s no real promise to implement this part of the program, and only to “explore” it, meaning… it’s probably not going to be included in the final proposal. And if I’ve learned anything from the 2016 Presidential Primaries, it’s that negotiations always end up trimming back the original promise, meaning that Hillary is probably just putting this out there to pander for votes, and already planning on withdrawing that part of the promise from the final plan.

Maybe I’m just skeptical of Politicians (and specifically of Hillary herself), but this plan doesn’t sound all that exciting, even if it were enacted in full.

Hillary Clinton’s Promise of Debt Free College

There’s only one thing that could save my negative outlook on Hillary’s plan, and that’s the promise to somehow make college entirely debt free.

Though details are scant (like, literally, nonexistent), this murky tenet of Hillary’s Initiative on Technology & Innovation is perhaps the one that I’m most excited about. In the write-up, she states that she plans to “Make Debt Free College Available to All Americans”, which sounds like something that Bernie Sanders might say.

Unfortunately, Hillary has decided to keep the details on how this should all work out to herself, so no one really knows what this promise means, or has any idea how, or even if, it would be possible to get this proposed plan through Congress.

Why has she chosen to keep silent on the specifics of the plan? What does it say about Hillary’s commitment to wiping out student loan debt when Bernie Sanders’s Free College Plan is scoped out with full details, and he’s no longer even in the race?

Does Hillary’s Student Loan Debt Plan Go Far Enough?

In a word, no. In a couple words, absolutely not.

My opinion is that this is perhaps the weakest student loan debt forgiveness platform that I’ve ever encountered, falling far short of what’s needed to actually make an impact on the rampant student loan crisis – a crisis that literally threatens our national security.

And since the United States Congress has repeatedly proven themselves to be the enemy of all people holding student loan debt – voting time after time to make things more difficult for the average American – our only real hope for effective relief is that a new President makes tackling this problem one of their core promises, as only they appear to have the power to start an effective dialog on the situation.

While President Obama’s Student Loan Forgiveness Program introduced revolutionary change to the industry, dramatically improving the prospects for all Federal student loan borrowers by offering them complete forgiveness after making 20 years worth of qualifying payments, Hillary Clinton’s plan for student loans fall far short of the sniff test, and appears to be nothing more than an empty campaign promise.

Who exactly will be able to benefit from Hillary’s student loan debt relief for Entrepreneurs? Likely the people who need financial assistance the least. After all, who’s most likely to be able to launch a new business right after graduation from college?

The same trust-funders and coddled rich kids that have nearly bankrupted the existing Public Service Student Loan Forgiveness Program which offers unlimited forgiveness benefits to the people who need them the least: Doctors, Lawyers, Dentists and other high-income earners with hundreds of thousands of dollars in debt, but also hundreds of thousands of dollars in annual income as well.

What Do I Think About Hillary’s Plan?

I see this as nothing more than another unbridled attack on middle-class Americans, and perhaps the opening shot of a real war on the average income earner. If this is any sort of a sign for what Hillary Clinton’s potential presidency could look like, then those of us who don’t come from a pedigreed family have quite a bit to be worried about.

What About Hillary’s Original Campaign Promises? (From 2015?)

If you’ve been tracking the 2016 Presidential Candidates from the beginning, then you might be wondering what happened to Hillary’s original promise for dealing with student loan debt, and how her official plan could be so much less valuable than what she originally proposed.

That, my friends, is Washington D.C. politics as usual, and something that we can probably thank her biggest backers (the huge banks that profit off crippling student loan debt) for setting in motion.

Here are the details from Hillary’s original plan, which was proposed way back in August, 2015:

Hillary’s “College Compact” Plan for Student Loan Debt

In August, 2015, Hillary Clinton release two of her famous “Factsheets” via her Presidential Campaign’s official Blog, “The Briefing”, each of which specified some incredible promises for helping a wide swath of Americans deal with their excessive student loan debt.

These Factsheets were titled College Compact: Costs Won’t Be a Barrier, and College Compact: Debt Won’t Hold You Back. Why would I even bother referencing Hillary’s old campaign promises and covering them in extreme detail now that they’re apparently out the window? Because her original plan was so comprehensive, it would have easily been defined as the absolute best possible assault on the student loan crisis in history.

Hillary Clinton’s “Costs Won’t Be a Barrier” Plan

Hillary’s “Costs Won’t Be a Barrier” plan was proposed to attack the problem of college degrees being literally too damn expensive. While she recognized that “there is no better investment we can make than in education…” especially considering that “college graduates earn $570,000 more on average in their careers than high school graduates…” she also correctly identified that the costs for attaining a degree from a 4-year school are simply too dang high.

As an example of this fact, this plan noted that in-state tuition-and-fees for 4-year public colleges and universities increased by 42% in a period of just 10 years (from 2004 to 2014), after adjustments for inflation were calculated into the math. Furthermore, her briefing notes that the situation for college hopefuls was made worse by the Great Recession beginning around 2007/2008, which decreased the amount of money states spent per student by 80% over a period of just 7 years.

And I’m in total agreement with Hillary here, because costs rising 42% while funding dropped 80% over the same period of time sounds like a perfect storm, and the resulting financial pain faced by new college student and their families was anything but unexpected. Hillary next notes that the Federal Government attempted to fill part of that void by injecting more funding into the system, but stated that this “has not done enough to address the underlying problem of rising costs.”

But it wasn’t just costs that she attacked in the introduction of this briefing, because Hillary’s “Costs Won’t Be a Barrier” piece also attacked the fact that graduation rates were appalling, with over 40% of students at 4-year public colleges failing to graduate from their programs within 6 years, and even worse graduation rates for 2-year schools.

Once again, I’m in total agreement with her premise here, that schools haven’t done enough to ensure that their students will actually graduate. And what could possibly be worse than graduating from college with a massive amount of student loan debt? How about FAILING TO GRADUATE yet still being saddled with tens to even hundreds of thousands of dollars in debt?

Hillary’s “New College Compact”

Hillary’s plan then launches it’s proposal for how it proposes fixing these two enormous problems, the overly expensive costs of college education, and the ridiculously low rates of graduation, outlining the program and labeling it the “New College Compact”.

This is a complicated proposal, so I’m going to lay out each point of it and cover them in detail.

Main Objectives of the “New College Compact”

1. Allow students to attend 4-year public colleges without taking out loans for tuition
2. Allow students to attend community colleges without paying to pay any tuition at all
3. Allow borrowers to reduce their student loan payments by refinancing their debt
4. Offer support for private schools that cater to minority and low-income students
5. Increase education benefits for military service personnel
6. Increase college graduation rates across the board
7. Decrease the costs of attending state-funded schools
8. Encourage schools offer innovative, affordable education programs

As a final note, the “New College Compact” also proposes to “reward innovation that makes a real difference in student outcomes”, meaning to offer incentives to schools, businesses or individuals who help do things that make higher education more efficient or effective. Personally, I read this as finding ways to reduce tuition and supplies costs, speed up degree programs, increase graduation rates, or ensure that graduates are able to find employment sooner after graduation, as well as making more money in the jobs that they acquire after earning their degrees.

But let’s unpack those points in detail, and talk about Hillary’s plan for accomplishing each of those 5 main objectives.

1. Helping Students Avoid Taking Out Loans for Tuition Costs

Hillary’s plan promises to increase Federal funding to any states that commit to making it possible for students to attend and graduate from state-run schools without having to “borrow for tuition”, and for reducing other education-related costs.

As part of this tenet of her plan, states will only receive access to those increases in Federal funds if they agree to “halt disinvestment in higher education” and promise to increase investment over some period of time (the time frame is totally undefined, so an empty promise would probably be enough to satisfy this condition), but it also requires that the states get their public schools to reduce costs, and increase educational innovation.

Here are the details on what states must do in order to qualify for the new Federal funding benefits promised by the Clinton “New College Compact”:

• States will also be required to limit the costs of non-tuition expenses, like the costs of room and board, supplies, books, and other related expenses, and Hillary’s plan notes that Pell Grants won’t be included in “the calculation of no-debt tuition”, so those student receiving Pell grants will be able to apply grant funds toward living expenses.
• States will need to distribute federal funds for the purposes of lowering college costs on all of their state-run schools, ensuring that 100% of the funds received get applied to actual education-related processes like instruction, learning, and improving graduate’s job and financial prospects
• States will receive Federal funds based on the number of in-state students enrolled at their state-run schools, with funds being larger for those states that have more low and middle-income students attending their higher education institutions
• States will be able to take advantage of a “ramp up period” (totally undefined period of time) during which they’ll be able to collect a portion of the promised Federal funds before they’ve actually met the other requirements outlined here, supposedly to help them figure out how they’re going to meet those goals
• Families of students taking advantage of these new Federal funds will be “expected to make a realistic and simplified family contribution” (to what? where? and in what amount? none of these factors are defined), and students will be required to contribute to their education costs based on whatever they can earn from working at least ten hours per week throughout the course of their collegiate careers

Did you get all that, because we’re just getting started? To summarize, Hillary’s “New College Compact” proposes to construct a new Federally-funded assistance program for the States that agree to work with their schools on reducing college costs, but a wide variety of the details about how this plan is supposed to actually roll out, and what’s required from the schools, states, student families and students themselves, has yet to be defined.

To me, this sounds like the typical pie in the sky promise from a Politician attempted to garner votes from people willing to vote for whoever offers them the best promise. It’s the virtual equivalent to a High School student running on a platform of “No Homework”, especially considering that it included all sorts of incredible promises, without any details about the eligibility requirements for receiving those benefits.

Am I suprised though? Does it shock me that Hillary’s original campaign promise (which helped her to secure the Democratic Presidential nomination) disappeared as soon as she clinched the nomination? Nope. NOT AT ALL! Again… this is Washington politics that we’re talking about.

2. Tuition-Free Community Colleges for All

Touted as a follow-up to President Obama’s recent plan (but more realistically, riding on the coattails of Bernie Sanders’s promise to make ALL College Free), the second tenet of Hillary Clinton’s “New College Compact” focused on ensuring that anybody who wanted to attend community college would be able to do so without having to spend a single cent on tuition.

Unfortunately, this promise came with literally zero details, with no information released about how community colleges would continue to operate profitably without receiving a single cent of tuition money, or whether or not community colleges could simply rename their costs from “tuition” to something like “fees” or “administrative costs” or some other similar phrase.

And like the rest of the tenets from the “New College Compact”, it’s pretty obvious that this promise was simply a carrot dangled in front a hungry population of people hoping to find some relief from the rising costs of college education, who may end up casting a vote in the primaries for Hillary based on the idea that they would be able to save a bit of coin in return.

3. Offering Refinancing Opportunities for Federal Student Loans

The third tenet of Hillary’s “New College Compact” another coat-tail type riding attempt to capitalize on someone else’s great idea – namely, Senator Elizabeth Warren’s proposal to offer refinancing opportunities for Federal student loans.

There isn’t much detail on Hillary’s offer, other than to make it sound like the Federal Government is the bad guy in the situation, since she accuses them of “profit[ing] when students borrow to pay for living costs or for private college”, which is bordering on the line of ridiculousness considering that Federal student loans come with a significantly lower interest rate than any student loans secured from private lenders.

And while Hillary’s “New College Compact” mentions that this change, “if enacted today, would cut interest rates nearly in half… reduc[ing] loan payments by tens of billions of dollars…”, once again, this incredible proposal that was at the top of Hillary’s list of things to do while she was attempting to earn votes to become the Presidential nominee has entirely disappeared now that she’s clinched the top spot on the ticket.

Could it get any more clear that Hillary’s tune has entirely changed throughout the course of the 2016 campaign season? Initially, her top priorities obviously sided more with the average person and against the interest of big banks, but now that she’s raised hundreds of millions of dollars for her campaign coffers (virtually only because of her reliance on those same big banks she was threatening to go after), it appears that her drive to help the common borrower has disappeared into thin air.

4. Increasing Military Education Benefits

The fourth tenet of Hillary’s “New College Compact” promises to provide “robust educational benefits for those who serve their country”, but it doesn’t promise any specific monetary increases to those benefits, and basically only says that the goal is to ensure Vets are aware of their benefits, and able to use them.

Hillary’s plan mentions that vets should not be defrauded of their benefits, and “have full information on the success rate of college and universities, and receive educational counseling and support along the way to complete their education.” From this part of the proposal, I smell a new meme in the works… will we start seeing a rash of “Thanks Hillary” posts on military sites?

The plan continues to promise some slightly more useful benefits, including:

• Closing the 90-10 loophole that for-profit colleges and universities use to prey on veterans
• Banning schools from getting any further federal student aid money if they’ve been found guilty of fraudulently recruiting students
• Expanding the VA’s efforts to offer comprehensive, easy access information about a school’s retention rates, transfer-out rates, and graduation or program completion rates
• Expanding the VetSuccess on Campus program, which helps veterans transitioning back to collegiate life
• Banning all loan servicers that have been found to overcharge service members and veterans

So, as usual, Hillary’s promises don’t offer much of actual value, at least in terms of financial or monetary benefits. Some of these support programs might be nice, but the majority of them are just going to expand the bureaucracy, essentially funneling money that could go directly to Veterans to paper pushers instead.

5. Expanding AmeriCorps

Hillary’s fifth tenet of the “New College Compact” promises to expand funding for AmeriCorps, expanding the program from the existing 75,000 participants to a much larger 250,000 volunteers.

On the financial side, she also proposes increasing one of the best benefits of AmeriCorps Service (and this is a legitimately excellent value to participants) by expanding the Segal education award to offer those volunteers who finish two year service contracts and one year public service positions with the ability to attend in-state public schools essentially for free.

6. Increasing the American Opportunity Tax Credit

Hillary’s sixth tenet includes a plan to extend the American Opportunity Tax Credit, which is another pretty significant benefit, and one that around 11 million American families are currently using to help fund educational expenses.

This part of her plan promises to make the current $2,500 tax credit permanent (it’s currently set to expire after 2017), and to offer up to $1,000 in refundable dollars to lower-income families.

I think this is a nice little benefit that offers some financial relief to many families, so I’m totally for including this as part of the overall student loan debt reform package, but I don’t think that the $2,500 tax credit alone is big enough to truly move the needle for most families, so it’s pretty much window dressing compared to what could be put on the plate.

How Does Hillary Propose Paying for It All?

The “New College Compact” includes a section discussing what the plan will cost (it’s estimated to be about $350 billion over a period of 10 years), and how it will be paid for (by “closing tax loopholes and expenditures for the most fortunate).

Now – that last bit I’m having trouble believing, because while Hillary is claiming that she will raise the necessary funds by taxing the 1%, does anyone really believe she would push an update like that through?

Hillary’s biggest backers ARE the 1% – it’s the banks, the corporations and the wealthiest individuals in the entire country who have been promoting her candidacy. Does anyone think she’d really use their funds to get elected, then immediately turn on them and start requiring them to pay significantly more in taxes ($350 billion is not an insignificant number…).

How Will the Money Be Allocated?

Hillary’s plan states that it will spend more than half the $350 Billion raised to fund the program on grants to states and colleges themselves. She promises that this money will ensure students aren’t going to have to keep taking out loans for tuition expenses, but again, I’m pretty skeptical that even half of $350 billion would be enough, considering that the total outstanding student loan debt in America is between $900 Billion and $1 Trillion dollars.

In my opinion, her $350 Billion dollar plan promises a lot of things that I don’t think it could actually deliver on.

I do like the part of her proposal that states that 1/3 of the raised funds will be allocated to help ordinary Americans with financial relief on interest from existing student loans, including benefits like allowing borrowers to refinance their loans at lower interest rates, and relaxing the eligibility restrictions for enrolling in income-based repayment plans.

To tell you the truth, I’m a huge fan of both of those programs and I think they would move the needle for many with outstanding student loans, but especially for people who are being absolutely crushed by excessive debt.

It really is the interest rate trap that places most of the people who end up in the worst financial trouble resulting from student loans, so allowing those borrowers to reduce their interest rates should go a long way toward preventing them from getting buried in unending, impossibly difficult payoff positions.

How Does Hillary’s Plan Compare to Trump’s?

That, dear reader, is a story for another day. Mostly because I have yet to complete a write-up on the Donald Trump Student Loan Forgiveness Plan, but the time is coming soon, and I’ll update this section accordingly when I can prepare a full analysis of The Donald’s platform.

Other Questions

If you’ve got questions about Hillary’s student loan forgiveness plan, general student loan forgiveness benefits, repayment plans, deferments, bankruptcies, defaults, or any other issues related to student loan debt, please feel free to ask them in the comments section below.

Alternatively, if you’re looking to reduce your monthly payments or apply for comprehensive student loan forgiveness benefits, you should consider calling the Student Loan Relief Helpline at 1-888-694-8235.

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