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Clinton’s $350 bln college plan gets passing grade

NEW YORK (Reuters Breakingviews) – Hillary Clinton’s college plan merits a passing grade. The Democratic presidential hopeful wants to limit tax deductions for the rich to help make higher education more attainable. There’s a risk, however, that poor students get cut off from elite schools, like Wellesley, where the former first lady earned her undergraduate degree.

The so-called New College Compact, unveiled on Monday, tackles a thorny problem in two ways. First, it proposes federal tuition grants to persuade states to spend more on their local schools. Second, the plan would alleviate some of the country’s $1.2 trillion student debt burden by allowing existing loans to be refinanced at lower interest rates and consolidating income-based repayment programs.

The cost of attending college has become a serious problem and Clinton is shrewd to make it a part of her campaign platform, appealing to frustrated students and parents alike. Tuition at public four-year universities increased 39 percent from 2003 to 2013, according to the U.S. Department of Education (http://1.usa.gov/1IzIgBp), outpacing the rise in inflation. Everything from state funding cuts to spending on the likes of state-of-the-art dining halls is to blame.

Clinton is trying to help cash-strapped states refocus on higher education, which typically affords graduates higher pay. Free community college is the lynchpin and could anchor the rocketing costs of a degree. By committing to fully fund such two-year programs, as well as providing grants instead of loans to lower-income students eyeing four-year state schools and to wealthier students willing to serve in AmeriCorps post-graduation, states would be eligible for nearly half of the program’s budgeted $350 billion over 10 years.

With so many incentives to attend community or public schools, there’s a chance that top-notch private schools become increasingly accessible only to the rich, thus deepening the U.S. class divide. Like the Race to the Top program for public primary schools, the New College Compact’s forced competition between states for money may reinforce an existing hierarchy of good schools in wealthy states and bad options in poor ones.

Clinton’s proposal, however, could just as easily prompt state universities to keep prices lower to compete with free community colleges. Lower prices at public schools should in turn contain the fast-rising cost of private tuition. That is, after all, Econ 101.

CONTEXT NEWS

– U.S. Democratic presidential candidate Hillary Clinton on Aug. 10 plans to announce a proposal that aims to lower the cost of attending university by giving states incentives to increase spending on higher education, according to a Reuters report, citing briefing documents.

– The New College Compact would offer a federal tuition grant to states that guarantee their community colleges would be tuition-free and public four-year schools would be loan-free.

– Clinton’s plan also would allow students to refinance existing loans at lower interest rates, streamline income-based repayment plans and police predatory lenders.

– The compact is expected to cost $350 billion and would be paid for by capping itemized tax deductions for the wealthy.

– Department of Education tuition statistics: http://1.usa.gov/1IzIgBp

(On Twitter https://twitter.com/kateduguid. Editing by Jeffrey Goldfarb and Martin Langfield)