Student loans are becoming a defining topic of the 2016 presidential election - which isn't surprising as the current national student debt figure stands at a huge $1.16 trillion. Many of the current presidential candidates recognize the severity of the problem and have proposed varying solutions.
But before we dig into these proposals, let's discuss how this debt burden is affecting today's young people:
- According to a 2015 Allstate / National Journal Heartland Monitor poll, nearly 30 percent of young people who define themselves as "starting out" said that paying back student loans was their biggest financial challenge.
- The same survey found that more than two-thirds of the same young people feel that starting out is more difficult now than it was for previous generations.
- According to a 2014 Wells Fargo study, millennials (aged 22 to 33 in this study) with student loans spend about 12 percent of their income on student loan repayments / education expenses.
- Young people are waiting longer to buy homes. The median age of a first-time homebuyer has risen to almost 33 (in the 1980s, it was around 30). Svenja Gudell, Zillow's chief economist, attributes this to difficulty in saving for a down payment and qualifying for a mortgage.
- One in four (27 percent) Credit Karma members has open student debt (student loan debt that isn't fully repaid). The younger the Credit Karma member, the higher the chance they have student loans: 36 percent of members age 18 to 34 have student loans as compared to 27 percent of 35 to 44-year olds and 20 percent of 45 to 49-year-olds.
- The graduating of class in 2015 has the most student debt in history, graduating with an average of $35,051 in student debt, according to Edvisors.com.
With numbers like these it's not surprising that this is emerging as a major focus of the election. Here's a recap on where the leading candidates have taken a stand:
In Aug. 2015, Clinton proposed her student loan reform plans in a package her campaign calls the New College Compact. It's estimated to cost $350 billion over ten years and would be paid for by closing tax loopholes for the wealthy. Here are some of the top-level points:
- 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 higher education tuition.
- Students would be expected to work 10 hours a week to contribute to the costs of higher education (what this work would entail hasn't been clarified yet.) Parents would also be expected to make a "realistic" contribution to their kids' tuition, although the amount hasn't yet been defined.
- 25 million Americans who currently have student debt would be able to refinance their debt to "a low interest rate" under this plan.
- Free community college.
In October 13th's Democratic debate, Clinton said, "The hardest thing about going to college should not be paying for it."
Sanders' student loan reform plan is called the College For All Act. Like Clinton's plan, there's a strong emphasis on pushing student loan refinancing options. However, he goes even further than Clinton by proposing to eliminate undergraduate tuition entirely at four-year public universities and colleges.
Sanders believes that the responsibility for decreasing student debt lies partly at the feet of colleges and universities themselves - "I want colleges to get their costs down. They're outrageously high in what they're charging," he said in October 13th's debate.
To pay for the $47 billion a year that the Sanders administration would provide to cover tuition costs at four-year institutions, Sanders would impose a Wall Street "speculation fee" on investment houses, hedge funds and stock trade speculators.
Student loan debt is personal for O'Malley - according to the Washington Post, O'Malley and his wife have already incurred $339,000 in loans to pay for college for their two oldest kids.
His vision is for debt-free college includes:
- Getting Congress to allow Americans to refinance existing student debt.
- Capping monthly loan payments at 10 percent of take-home pay for low- and middle-income students.
- Ensuring that colleges and universities that receive federal assistance channel the funds toward students who require it the most (by rewarding colleges who do well at making college affordable, for example).
Rubio has proposed a number of solutions in order to fix the student debt crisis. In 2014, he introduced a bi-partisan bill with Senator Mark Warner (D) to establish a universal system of income-based federal loan repayment.
Here's how that system might look in action:
- Anyone with multiple federal loans could consolidate them into one loan with a simplified income-based repayment plan. While income-based repayment plans already exist in the current system, Rubio said in a 2014 speech at Miami-Dade college that these are "terribly insufficient and replete with unintended consequences. Many graduates don't even know the programs exist."
- Interest rates would be based on federal Treasury rates.
- Loans less than $57,500 would be forgiven after 20 years. If the loan is higher than that, it would be forgiven after 30 years.
Rubio has also proposed reforming federal student loans so that private investors can pay for a student's tuition in return for a percentage of the student's income for a set amount of time once he or she graduates - a proposal known as the Student Investment Plan.
Trump currently doesn't have a firm student loan proposal on record, but in an interview with The Hill, he stated that he doesn't believe that the federal government should be able to profit from student loans. While he hasn't put forward many specifics on how he would fix this, Trump has said that one of his main priorities is getting students who are crippled with student debt into the workforce.
"They can't get jobs and they don't know what to do," Trump said in The Hill interview.
Carson doesn't list student loan debt as one of his primary issues on his website, but he has proposed some changes to the current system:
- In an interview with the Eagle, Carson said that public universities should pay the interest on student loans and students should be responsible for the principal only. He believes this will help colleges rein in their rapidly rising tuition costs.
- He opposes President Obama's free community college plan, saying in a Feb. 2015 interview with Tim Constantine that poor students already have access to Pell Grants.
In an interview with Rachel Cruze, Carson said, "College is not a right; it's a privilege," and that in order to get out of college debt-free or with reduced debt, students should "work."
Many of the leading presidential candidates have proposed solutions to the student debt crisis - but who do you think has the best proposal? And is there anything else you think can be done to help alleviate this gigantic problem?
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.