What do you get when a politician gets stuck in a 1982 Jane Fonda workout video? You get to feel the Bern! That was a terrible joke, but the movement created by Bernie Sanders was just as high energy as Jane Fonda’s workout and took the country by storm in 2016. For many young people in particular, Senator Sanders was one of the few Washinton Politicians who truly understood where they were in life and the struggles that they faced. Many politicians and pundits, on both sides of the aisle, quickly labeled him as a communist, socialist, madman and who knows what else. But Senator Sanders pressed on and built a base largely on the often forgotten, tragically ignored masses of younger voters.
The two cornerstones of his campaign were medicare for all and a solution for the student debt crisis. His proposal for student loans was quite simple. He pledged to cancel all existing student debt on his first day in office as president, make public education institutions free for all students and “make college debt free for all.”
When compared to all the other student debt plans out there, Senator Sanders’ plan is the most straightforward one. The first part is simply cancelling ALL existing student loan debt regardless of income or type of student loan. This would also include the parents who took out loans for their kids. There is no additional scale or tiered cancellation plan. All of it is cancelled. For students currently in school and future generations, Senator Sanders’s plan called for working with public institutions to eliminate tuition costs. To help public institutions accomplish that, he called on congress to pass the College for All Act, otherwise known as CAA, which would provide $48 billion annually to public institutions to cover the cost of tuition. For most students, this would be a savings of about $3,000 a year and lessen the massive burden of the full cost of tuition at a public institution.
For other expenses, like accommodations, books, transportation, food and other living expenses, the CAA would provide Pell Grants to low income students to offset the costs. States would also be required to cover any additional excess costs not covered by tuition offsets and Pell Grants for low income students. In addition, states would be eligible for funding matches at a 1 to 1 rate for spending towards reducing the cost of attendance. That extra funding can be used for bringing on additional staff, professional development or developing additional student success opportunities. For students that do have to take out loans to cover attendance costs outside of tuition, interest on those loans would be capped at 1.88% instead of the current average rate of about 5-6%.
On average, students today spend around $21,000 annually on expenses related to their education but note on tuition directly. A large portion of that is attributed to housing and accommodations. The rest comes from the soaring costs of books, educational supplies, food and transportation. For a student like me who had to take out $30,000 in student loans and work 2 jobs as well to pay for college, my debt load, if I attended college today under Senator Sanders’ plan, would be much smaller. Most of the loans I took out for college went directly to tuition and books. All other costs were covered by earned income. Having attended a 4 year public school, under the CAA, I would have graduated with ZERO student loans due to tuition. Since I did not meet the CAA thresholds for Pell Grant assistance, I still would have had to work to make ends meet, but I would have graduated debt free. Had I not worked 2 jobs during college, I still would have had to take out loans to pay for living expenses.
The main problem with the idea of students all graduating debt free is that most of the initiatives in place only apply to low income students. For a student coming from a middle class family attending college, they still have to address how they are going to be able to pay to attend school. Say a student from NYC chooses to attend a public school like the University of North Carolina Chapel Hill. Out of state tuition would be covered under the CAA but they would still have to deal with living costs. If they were in a competitive program like the pre-business or pre-med programs at UNC, they wouldn’t have as much time to work. When taking out loans, most students are taking out enough to cover tuition and living expenses.
Going the cheaper route, dorms would cost an average of $9,000 per year, plus $4,000 per year for meal plans as well as $2,000 per year on books and supplies. Unless the student is going to school and living on campus year round, they still have to factor in housing for the summer and during breaks, travel costs if they aren’t staying in the area over the breaks, and other miscellaneous living expenses. Under the rules outlined by the CAA, future interest on all loans used for educational expenses would be capped at 1.88%, but many students would still need to take out loans to be able to afford going to school.
Senator Sanders’ plan would also triple the funding for work study programs. At current funding levels, work study is only available for about 700k students. With an expansion of funding for the program, 2.1 million students would be able to further develop professionally and earn income while preparing for life after college. An expansion would provide training for 1 in 7 students each year. The biggest knock on most graduates each year is that they are arriving in the workforce with limited experience. Internships are fiercely competitive and few students are able to land a relevant position each year. Oftentimes, they are over the summer. With an expansion, more students will have access year round to vital work experience to better prepare them for life after school while earning money to support themselves right on or near campus.
There is absolutely nothing wrong with flipping burgers or washing cars. Those jobs are essential to keeping the world running. However, a work study program where I could have worked and gotten additional experience with a technology company or non-profit would have better prepared me for where I am now as opposed to the summer spent washing and waxing cars. From an educational standpoint, the added value of on the job experience is far more valuable than the extra $200 a week I could earn washing cars. From the employer standpoint, they could easily invest in positions with the financial costs covered by the work study program and use that as an additional recruitment tool to develop talent for the future of their company. Upon graduation, those in the work study programs would be prime candidates for positions since they would already have dedicated experience to the process and already be pre screened without any added costs.
To fund his plan, Senator Sanders would tax Wall Street in a manner similar to what 40 other countries already do to their exchanges. These taxes on Wall Street speculators would be at 0.5% on stock trades, 0.1% on bonds, and 0.005% on derivatives. Over a 10 year period, the taxes are expected to generate close to $2.4 trillion in tax proceeds. As of this writing, it was announced that Jeff Bezos just made a trade and sold $3 billion worth of Amazon stock. That single trade would have amounted to $15 million in taxes alone. On an average, over $200 billion of stocks are traded every single day on the NYSE. That amounts to $1 billion in taxes per trading day, about $253 billion each year on stocks alone.
While there has been quite a bit of pushback from Wall Street over the proposal, it is worth noting that Wall Street has taken trillions of taxpayer dollars in bailouts in the last 10 years alone. Senator Sanders’ campaign argued, if Wall Street can be bailed out during the worst of economic times by the taxpayers, so too should the 45 million Americans who are suffering from the burden of student debt. What do you think?
While it does seem a bit far fetched and overreaching for the federal government, Senator Sanders’ plan does seem to solve a lot. His plan is one of the few that adequately addresses the challenges facing current borrowers while providing a fully funded solution for most future students. However, it is quite limited in addressing the additional costs of attending college and would continue to create graduates leaving schools with student debt for those expenses, albeit, capped at that 1.88% interest rate.
Under the CAA, the economy could potentially be much better off overall. A massive reduction in student debt offset by taxes on Wall Street could potentially add 1.5 million jobs to the market each year, as well as boosting the economy by $1 trillion over the next 10 years with more people suddenly able to afford to have families, houses, and spend their hard earned money on things other than student loans while helping to close the wealth gap. While the plan isn’t perfect, it is still a step in the right direction that can be built upon and has been a key force in bringing the discussion regarding student loans mainstream.