Tag: loans

College is expensive, Columbia ridiculously so. Columbia is the most expensive school in the Ivy League and amongst the most expensive in the nation. Now, Columbia is very generous with financial aid, meeting 100% need for all students and not packaging student debt in its financial aid offering. However, student debt is still an option. In 2013, the WSJ reported that the average student loan at time of repayment was $12,500. If you end up like the 4.2% of college graduates unemployed as late as September of 2016, that’s a difficult debt to pay down, still so if you consider yourself underemployed at Starbucks.

Hillary Clinton, urged by a primary challenge by Bernie Sanders, wants to change this. The Democratic Platform wants to make public college debt-free, community college totally free, and current debt re-financeable. If accomplished, her plan theoretically would free up money for the consumer economy that otherwise would go to paying down interest, and it would make college as accessible as high school is today. Too bad she won’t get to enact this entire plan. Major legislation needs to get through Congress before it gets to the president’s desk, and for a variety of reasons, the House is probably going to stay Republican. She could change the executive’s interpretation of the law, a power often used by President Obama and widely criticized by anyone who believes the president should not have too much power. For that very reason, she probably couldn’t get away with too much without alerting the House. She could also, as she suggests, pressure states to cough up some of the funding necessary to make community college free and fund other parts of her agenda, but that was the same system the Affordable Care Act used, and Republican governors by-in-large revolted.

It doesn’t sound like this affects Columbia much if successful, given Columbia isn’t a public university nor does it host community colleges. But competition can play a role. With free and debt-free options available, many students that Columbia would otherwise recruit might prefer to use those free local options instead of expensive private schools which may not have an accurate picture of what 100% need means for them. Columbia would probably reach into its endowment and rest on its prestige to give more full scholarships, which also sounds like it shouldn’t be a problem, but of all the Ivy League universities, only Yale experienced positive endowment growth last year. A significant increase in financial aid to remain competitive may add to that concern, though not as much as it would for smaller private colleges.

This is the part where I describe the nominal Republican alternative, where the government gets out of the debt business and leaves student loans in the hands of the private sector. For people with good credit, this would be good news. Your interest rates wouldn’t be as low as an auto loan or mortgage, but because the banks trust you, they’ll feel safe loaning money at lower interest rates. People with no credit history, however, get stuck with the higher interest rates, and people with bad credit might not get a loan in the private sector at all. But, Donald Trump complicates everything, as he promised to cap presumably federal loan payments at 12.5% of income and forgive the rest after 15 years. That’s more generous than the current Democratic plan to cap payments at 10% but only forgive after 20 years. That also means it’s more expensive and doesn’t fit into the economic conservatism that normally characterizes the Republican Party and such a plan would have a hard time passing Congress, but Donald Trump would also have the executive branch and the same power of interpretation Obama enjoys today. In case you thought endowments would be safe here, though, Donald Trump also threatened to revoke tax-exempt status for endowments, which certainly isn’t winning him any fans in the administration.

Those are your options. No pressure.