On Monday, Democratic presidential candidate Hillary Clinton released her plan to combat the ever-rising cost of a college education in the United States. Clinton's proposal, which her campaign is calling the New College Compact, aims to make college entirely debt-free for students at public universities.
How does it work?
Clinton's plan starts with a basic premise: No student at a public university should have to take out loans to pay tuition. Here's how it might work:
- The federal government would contribute $175 billion in grants to states that guarantee that public university students won't have to take out loans to pay for tuition.
- States would be required to end higher education-related budget cuts, slow the growth of tuition fees and cut costs like high salaries for administrators.
- Parents would be expected to make a "realistic" contribution to their children's tuition and each student would be expected to work 10 hours per week to contribute to their costs.
Clinton also intends to allow those already saddled with debt to refinance at lower rates, and promises that the federal government won't profit off student loans anymore. She also wants to follow through with President Obama's plan to make community college entirely tuition-free.
Why does the student loan system need change?
Student debt in the United States is skyrocketing. The class of 2015 graduated with the most student debt in U.S history, at an average of over $35,000 per student. Student loans are not only bigger but also far more common--around 70 percent of graduates had loans in 2015, compared to just 46 percent in 1993.
In total, TransUnion data shows that student debt has doubled since 2010, and now sits at almost $1.2 trillion.
The explosion of debt is well-reflected among Credit Karma members, too. Around 39 percent of Credit Karma members between the ages of 21 and 29 have open student loans (loans you still owe money on), compared to 27 percent of all of our members. Those debts stick around, too: 30 percent of Credit Karma members between age 30 and 44 also have open student loans*.
The cause of the huge increase in student loan debt is straightforward: College is far more expensive now than it has been in the past. In the last 15 years, the average cost of a four-year private nonprofit education has risen from $22,179 to $31,231. For public universities, the cost has risen 90 percent, from $4,805 to $9,139.
So what now?
Hillary Clinton isn't the only one talking mounting student debt --other presidential candidates, politicians and activists have weighed in with their own plans. As we enter a new election cycle and student debt totals continue to rise, you can expect this to be a big issue going forward.
Though it would introduce new refinancing options for public loans, Clinton's plan wouldn't wipe out any debt students have racked up in the past. If you're in that boat, you might want to do some research and see if you could save some money by refinancing or consolidating your loans.
If you have a public loan, you may have more repayment options, such as increasing your loan term in exchange for lower monthly payments.If you have a private loan or if you want to refinance a public loan, you can also look into private lenders. Use Credit Karma to compare your options and help scope out the right deal for you.
If you're still in school or looking to go back in the future, you might be thinking that debt-free college education can't come soon enough. In the meantime, though, make sure to investigate before you rush into any sort of commitment. As our numbers show, student debt is a financial burden that can stay around for years, so it's best to arm yourself with as much information as possible.
*Based on the latest available credit report information of over 40 million Credit Karma members.
Editorial Note: The opinions you read here come from our editorial team. While compensation may affect which companies we write about and products we review, our marketing partners don't review, approve or endorse our editorial content. Our content is accurate (to the best of our knowledge) when we initially post it, but we don't guarantee the accuracy or completeness of the information provided. You can visit the company's website to get complete details about a product. See an error in an article? Use this form to report it to our editorial team. For questions about your Credit Karma account, please submit a help request to our support team.
Advertiser Disclosure: We think it's important for you to understand how we make money. It's pretty simple, actually. The offers for financial products you see on our platform come from companies who pay us. The money we make helps us give you access to free credit scores and reports and helps us create our other great tools and educational materials.
Compensation may factor into how and where products appear on our platform (and in what order). But since we generally make money when you find an offer you like and get, we try to show you offers we think are a good match for you. That's why we provide features like your Approval Odds and savings estimates.
Of course, the offers on our platform don't represent all financial products out there, but our goal is to show you as many great options as we can.