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Clinton’s Student Loan Plan: Subsidies for Stanford Graduates

Hillary Clinton, multimillionaire politician, Davos-guest extraordinaire, and giver-of-speeches to Goldman Sachs, is reportedly worried that she is not in tune with the populist mood of the electorate—and understandably so. But her latest student loan initiative—essentially, a targeted subsidy for the most successful college graduates—doesn’t seem particularly likely to help repair her image of among voters who feel that the system is rigged in favor of connected elites. Here’s Alexander Holt in Inside Higher Education:

In trying to prove how much she believes in innovation and how much Silicon Valley investors should donate to her campaign, Clinton proposed some of the most complicated ideas for loan forgiveness ever. Not only are they hard to implement, but they would help wealthy Americans over everyone else.

Clinton has two loan proposals. First, anyone starting a business who has federal student loans can choose to not pay the loans for three years and not accrue any interest. She would also “explore” applying this to the first 10 or 20 employees of a new company. […]

Clinton’s second proposal is that “for young innovators who decide to launch either new businesses that operate in distressed communities, or social enterprises that provide measurable social impact and benefit, she will offer forgiveness of up to $17,500 of their student loans after five years.”

The real losers from America’s dysfunctional student loan system are not young CEOs, but marginal and disadvantaged students who are often pushed by federal subsidies into programs they can’t complete or can’t afford. The overwhelming majority of the students in default on their federal loans went to third-tier or for-profit institutions or failed to graduate altogether. Graduates with the skills and social resources needed to incorporate a successful company are not in need of an expensive bailout.

Moreover, as Preston Cooper argues at Economics21, Clinton’s promise to give special treatment to the loans of graduates who work at vaguely-defined “socially impactful” companies is practically an invitation to cronyism. “In all likelihood, this provision would be used subjectively by Washington bureaucrats to reward the owners of favored businesses, while implicitly punishing those who fall outside the privileged category,” he writes.

Any serious policy for reducing Americans’ student loan burden should focus on bringing down the cost of college. That means shaking up the accreditation system to encourage more competition and forcing colleges to have skin in the game if their students can’t pay back their loans. It also probably means that the federal government should rein in its free-flowing loans and make more room for private lenders. Further expanding subsidies while creating exemptions and carveouts for favored interests is a regressive approach that will just make higher education more expensive and more unfair.

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  • Andrew Allison

    Clinton and cronyism are synonymous.

    • johngbarker

      I think they may redefined the terms.

  • Anthony

    “Clinton’s plan could be more about wooing millennial voters who supported her primary election rival, Senator Bernie Sanders, than it is a serious policy idea. But it is distressing that so many proposals to deal with student debt rely on ever-more creative ways to discharge loan obligations at taxpayer expense rather than focusing on the root of the problem: high tuition for degrees that are worth less than they should be. Until we address these issues, loan forgiveness should wait.”

  • Boritz

    Legislation is designed to help:
    a. the wealthy
    b. the underclass
    c. both
    This proposal falls into standard category a, There will be other proposals that benefit cat b.

  • QET

    $17,500 forgiven of $100,000 in debt? So $100,000 is crushing but $82,500 isn’t? And this what people consider “policy” or being strong on “the issues”? Or is the widely-cited $100K figure only mythical?

    And I would disagree somewhat with TAI’s statement about the real harm being to “marginal and disadvantaged students” who can’t do the financial math beforehand. The real harm is that PLUS the channeling of those kids into vacuous “studies” majors that don’t in fact give them any education at all, and for which even a $10 tuition bill would be $10 too much.

    • f1b0nacc1

      More to the point not too many of those Grievance Studies are going to be starting a business (unless they can find a way to monetize whining), so this won’t help them out either. Of course then we will discover that the primary beneficiaries of this proposal are white men, and the cry will arise to do something about this horrible ‘gap’

      • QET

        Yes, I think that’s just TAI’s point. But without all of these “marginal and disadvantaged students” being herded into college in the first place, where most of them have no business being, there would be no crisis that required addressing. And the reason they are then further herded into “___ Studies” is because they are unprepared to study any traditional field. And this is news to exactly nobody. Everyone knows this already. The herding of the unprepared kids into college is done not for their benefit but for the benefit of the herders, and I’m not talking about just the loan-originating banks and the bloated college administrations.

        • f1b0nacc1

          You forget the third beneficiary, the useless academics with their ‘Studies’ degrees, who also need a steady stream of warm bodies to fill the seats in their lecture halls.

          • Jeff Paine

            And don’t forget those of the Bureaucrat-Class, the administrators whose ranks (especially “diversity administrators”) have grown far in excess of teaching staff and ratio to students.

  • Jim__L

    Of the philosopher-kings, by the philosopher-kings, for the philosopher-kings.

    Everyone else can eat cake.

  • Tom

    Once you understand that these proposals are meant to help out academics and college administrators, a reliably Democratic constituency, and that helping students is at best a secondary goal, it all makes sense.

    • seattleoutcast

      Tom, I didn’t see your comment before I made mine. Sorry.

      • Tom

        No worries.

  • seattleoutcast

    Another band-aid solution that will only enrich bureaucrats with ever increasing paperwork. Why can’t democrats ever get to the heart of the problem.

    Oh, sorry, no need for a response from anyone, I just figured it out. Solving the problem would remove handouts to constituents. Silly me!

    • Jeff Paine

      The ‘handouts to the constituents’ are the least of it. Our government leaders are corrupt to the bone and are all about power, control and money for themselves and money for their super-rich cronies, in that order.

  • Fat_Man

    I will say it again, as long as tuition is being paid by the Federal Government, whether by grant, or through loans, there must be a comprehensive system of price controls on the colleges. No more $2 million Presidents, or $5 million football coaches. No $250,000 professors who teach one graduate seminar per year and spend the rest of their time on their “research”. Just think of the colleges as public utilities just like the electric company or the gas company.

    • Jeff Paine

      More government is not the answer. Especially when government *is* the problem. These salaries and other wastes of money are symptoms of the problem, not the root cause.

      The root cause is far too much money flowing into colleges by government redistribution through student loans and other means. The problem from the university side is that they are addicted to government welfare in the form of student loans and other government monies with strings attached (as in the Title IX fiascos occurring regularly).

      Price controls will not work. The bloated inflows of money to the system must be stopped or at least decreased significantly. Then the problems will take care of themselves.

  • Jeff Paine

    Hillary’s plan – scheme really – is naked redistribution of middle/working-class wealth to SJWs. It punishes the non-SJWs and provides welfare for the otherwise unemployable “safespacers” produced by colleges that are destined to be massive burdens on society.

    So, of course, the RINOs will fund it once she’s elected.

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