Hillary Clinton’s college affordability plan, explained

Hillary Clinton's higher education plan is a wide-ranging proposal that calls for lowering student loan interest rates, making it possible for students to avoid borrowing to pay tuition at public universities, and changing how students repay their loans.

The ultimate goal of Clinton's $350 billion plan is to make it possible for students to attend a four-year public university without requiring them to take out loans to pay tuition. But the plan includes far more than that. Clinton has laid out a four-year agenda on how she'd like to change higher education.

Much of the plan would continue or build on the Obama administration's policies. But Clinton's vision for higher education also reflects two big Democratic ideas that have become prominent more recently: that the federal government needs to step in to reverse years of state cuts to higher education, and that student loan interest rates should be as low as possible.

The problem Clinton wants to solve: states spend less per student than they used to

(Kevin Hagen/Getty Images)

States are paying less of the cost of providing education at a public college, and passing more of their costs on to students. That's a trend that started before the Great Recession, but has accelerated since 2008. Many people, including the Obama administration, argue that this is one of the greatest drivers of student debt.

Nearly all states are spending less per student — on average, 20 percent less — than they did before the recession, according to the Center on Budget and Policy Priorities, a left-leaning think tank. Meanwhile, tuition has gone up; families are paying a bigger share of the cost, and state governments are paying less.

At public research universities, students pay 56 percent of the cost of their education, up from 25 percent in the 1980s.

The result: tuition and fees for in-state students have increased by nearly 30 percent since 2007, from $7,080 to $9,140, according to the College Board. The price the average family actually pays for tuition and fees after financial aid hasn't risen as sharply, but it's gone up too, from $2,680 to $3,030.

Democrats, including Elizabeth Warren, Bernie Sanders, and now Clinton, have called for the federal government to either force states to spend more on higher education, or to kick in additional federal funds to help states lower tuition or stop it from increasing. The goal is to ensure that students have the option of attending a public, in-state, four-year college with minimal debt — which was commonplace in the 1970s and 1980s but is increasingly rare now.

Clinton wants to 'bend the cost curve' in higher education

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A goal of Clinton's plan, according to a senior policy adviser in an interview Sunday, is to "bend the cost curve." That means lowering the cost of actually providing the education, not just shifting who pays for it.

Creating a state grant program aimed at lowering tuition at public universities is the centerpiece of Clinton's proposal. Clinton is calling for spending roughly $175 billion over 10 years on grants to states to lower tuition.

In order to qualify for the money, colleges would have to promise to set tuition rates so that students can afford them without taking out loans. It doesn't promise that students will graduate debt-free — room and board and other living expenses often cost more than tuition at state universities.

Still, cheaper tuition would mean students could use more of their federal aid, like Pell Grants, to cover living expenses. And Clinton has called for additional money for colleges that work to lower living costs for students from low- and middle-income families, so that they don't have to borrow as much in order to graduate.

Clinton says that colleges passed the cost of education onto students rather than "tightening belts" during the recession, and she wants to change that.

In some areas, colleges did actually tighten their belts. But it's true that the bulk of state cuts got passed along to families instead. Public colleges cut back their spending on overhead costs as state appropriations fell between 2000 and 2010, although they maintained their spending on academics and spent more on research. That's according to a report from the Delta Cost Project, which argues that public colleges did a good job targeting their cuts to ensure they didn't damage their academic mission.

It's not yet clear what colleges would be required to do about costs in order to participate in the grants, but the adviser mentioned keeping spending on administration in check and using technology to lower the cost of education — for example, making it easier for some students to fulfill some requirements online. (Sebastian Thrun, the founder of Udacity, a provider of free online courses, was one of the advisers on Clinton's plan, according to the campaign.)

Clinton's plan is trying to address a short-term reason college costs have gone up: that students are paying a greater share of the cost and states are paying less. But it's also trying to address long-term trends that explain why tuition has increased faster than inflation since long before the recession.

Clinton wants to push colleges to increase graduation rates

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Clinton's plan also calls for colleges to improve their graduation rates — something the Obama administration has pushed colleges to do, so far without great success.

In 2009, Obama called for the US to again have the world's highest proportion of young adults with a college degree by 2020. At the time, the US was ranked 12th. There have been small improvements — the nation is now tied for 11th — but there's almost no chance the US will achieve the goal. (South Korea leads the world with a 67 percent college graduation rate, compared to 44 percent in the US.)

Clinton wouldn't set a graduation rate cutoff for colleges to participate in the new grant to lower tuition program, but colleges would be required to demonstrate how they're going to improve their graduation rates, the senior policy adviser said.

"We expect a commitment from colleges to do a better job," the adviser said, and increasing completion rates is "a core component" of that.

Colleges would be held accountable in other ways. Clinton's plan endorses risk-sharing — the idea that colleges should be liable for part of the costs to the federal government if students default on their loans — which has gotten bipartisan support in Congress.

She also proposes reforming accreditation and making it easier for other providers of college coursework and training to access federal financial aid. That's an area the Obama administration has been interested in, but that's also popular among Republicans, particularly Sen. Marco Rubio, who is running for president.

Clinton would lower student loan interest rates — including for existing borrowers

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Clinton's proposal has also borrowed an idea from Sen. Elizabeth Warren: that the federal government should make as little money as possible on student loans.

Clinton is calling for setting the interest rate on student loans "so that the government never profits" — which the campaign said would cut the interest rate on student loans nearly in half. (Whether the government actually profits on student loans, and how much, is the subject of a fierce and partisan accounting battle, but the Congressional Budget Office has projected the federal government will make $127 billion over the next 10 years, mostly on graduate students.)

Clinton also wants people who have student loans to be able to refinance them, lowering their payments. Student loan interest rates are now tied to interest rates in the broader economy, and they're currently low relative to where they were in previous years. A few private banks and finance companies let students refinance, but Clinton has proposed a more widespread effort to extend those lower interest rates to all borrowers.

Finally, Clinton is calling for a major change to how student loans are paid back: she wants all borrowers to repay their loans based on their discretionary income. Payments would vary as borrowers' incomes change, and any remaining balance would be forgiven after 20 years of payments.

That's how student loans are paid back in other countries, including Australia. And although those payment plans are available in the US and becoming more popular, many borrowers stick to the standard 10-year plan. Clinton wants an income-based plan to be the default.

Clinton would continue many Obama higher ed policies

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Taken as a whole, Clinton's plan suggests that many of the Obama administration's policies would continue under a Clinton administration, including some that don't need Congress.

She would continue pushing for more transparency around student debt and post-graduation salaries at individual colleges to allow students to "shop around" — something Obama has emphasized. She would continue to enforce the gainful employment rule, which judges for-profit colleges and vocational programs based on their graduates' debt and incomes after graduation. And her plans suggest that graduation rates would remain an important focus.

The idea that Clinton would continue Obama's education policy isn't as obvious as it might seem. The rest of the Democratic Party, including prominent voices on higher education such as Sen. Elizabeth Warren, haven't been as enthusiastic on some of Obama's ideas. Education Secretary Arne Duncan has said he's concerned that the conversation about debt-free college, proposed most notably by Bernie Sanders, hasn't focused enough on graduation rates.

Clinton's plan includes many of the central ideas from ideas from more liberal Democrats like Warren and Sanders. But it also keeps, at least in part, a central premise of the Obama administration: that colleges have been the victim of forces beyond their control, but they're not entirely blameless either — and that the federal government needs to call them to account for their spending and success rates.

When asked whose thinking had influenced the plan, the senior campaign official listed former Obama higher education officials (including Rohit Chopra, formerly of the Consumer Financial Protection Bureau, and Bob Shireman, who oversaw many of Obama's first-term higher education accomplishments) and college presidents who have long supported the administration's focus on holding colleges accountable, such as SUNY's Nancy Zimpher.

The plan is expensive and would be a long shot with a GOP Congress

The price tag for all Clinton's proposals is $350 billion over 10 years. That's a huge expansion of federal higher education spending; for comparison, the Congressional Budget Office projects that the Pell Grant program, the biggest part of the federal financial aid budget right now, will cost $380 billion over the next 10 years.

It's unlikely that Clinton would get everything she's proposed, even if she's elected, particularly with a Republican Congress.

Still, her plan is an important look at the future of Democratic higher education policy. It suggests some of the Obama administration's most prominent ideas — such as a push for greater transparency in higher education and a focus on income-based repayment as the way to manage student debt — are likely to remain growing orthodoxy.

But it's also the clearest look at how the party's approach to college affordability could shift. Clinton's plan reflects a growing consensus within the party that states alone can no longer keep tuition affordable at public colleges and universities, and that the federal government needs to step in to share the cost or force them to spend more.

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