Clinton's College Plan

October 12, 2007

Sen. Hillary Clinton, the Democratic front runner for president in 2008, unveiled a college aid plan Thursday that would pour $8 billion a year in new funds into an expanded tuition tax credit, bigger Pell Grants, support for community colleges, and work force training, among other things. It would also require public colleges to set multiyear tuition rates to help families better plan to pay for college and compel them to publish information about the employment rates and earnings of their students upon graduation (proposals that even the Spellings Commission might love). And like the other leading Democratic candidates, Clinton calls for financing her increased spending in part by eliminating the guaranteed student loan program.

It is obviously early in the presidential campaign, and candidates at this stage face relatively little downside for offering pie-in-the-sky proposals that may go nowhere. Still, Clinton's status as the current favorite in the Democratic race and the comparatively extensive and detailed nature of her proposal combine to make it noteworthy as a possible harbinger of the role of higher education in the 2008 campaign and, depending on what unfolds in the year ahead, of future federal higher education policy.

That is especially true because of the overlap (at least in broad strokes) in the proposals put forward by the candidates so far, most of which have come from the Democrats. Like her colleagues and competitors Sens. John Edwards of North Carolina and Barack Obama of Illinois, Clinton calls for mammoth new spending on college aid for students from low- and middle-income families (though the details of the various plans differ: Obama would direct most of the funds to Pell Grants; Edwards would create a new grant program; details on Clinton's ideas are below).

And in the plan she announced Thursday, Clinton joined Edwards and Obama in calling for an end to the Family Federal Education Loan Program and funneling student loans through the government's competing Direct Loan Program. (In his own education proposal released Thursday, another Democratic candidate, Gov. Bill Richardson of New Mexico, appears to propose a largely similar approach, saying he would "eliminate the enormous subsidies to banks and private lenders and redirect that money to students who need it.")

Clinton's proposal is by far the most detailed plan released by a candidate yet. The plan includes multiple proposals aimed at bolstering Americans' college going rate, by:

  • Transforming the current Hope tax credit that her husband created when he was president. Clinton said she would more than double the value of the Hope credit to $3,500 from $1,650, allowing taxpayers to claim 100 percent of the first $1,000 they spend on college expenses and 50 percent of the next $5,000; make it "partially refundable," meaning that families that owe less in taxes than the amount of the credit would still be able to claim some of it; and make it "advanceable," so that families could receive the credit at the time their tuition bills are due rather than waiting until they file their tax returns a year or more later. The latter changes are designed to make Clinton's tax credit of greater benefit to low-income families, to whom the existing federal college tax credits and deductions are of relatively little use.
  • Ensuring that the value of the maximum Pell Grant (which received a big boost under the College Cost Reduction and Access Act that President Bush signed last month) increases in the future by "annually adjusting it to take account of rising college costs."
  • Providing $500 million in grants to community colleges to ensure that their students complete degrees or to joint community college-university programs aimed at increasing the rate of transfer from two-year to four-year institutions. "Too often community colleges are given second-class treatment in our postsecondary education system," Clinton said, even though 43 percent of undergraduates start there and the institutions are "on the cutting edge of most major workforce training initiatives."
  • Creating a $250 million "Graduation Fund" to give incentive grants to four-year colleges to undertake "performance-based efforts to improve their graduation rates, especially among low-income and minority students."
  • Spending $250 million to finance apprenticeship and job training programs, mixing skills training and academic work, at the local level.
  • Doubling the education award in the AmeriCorps program (which has been frozen at $4,750 since the program was created, also under President Clinton, in 1993) to $10,000 to "get it back on pace to covering a meaningful portion of the cost of going to college for people who devote a year or two of full-time public service to our country."
  • Simplifying the process of applying for federal financial aid by allowing people to apply for financial aid by checking a box on their federal income tax returns; in return, they would receive a coupon from the Education Department indicating how much they could expect in federal grants and loans.

Clinton's plan also contains several proposals designed to pressure colleges to do more to make college affordable. Among them, the plan would:

  • Ensure that the U.S. Education Department collects and publishes information about "the outcomes produced by all colleges and universities, including the four-year and six-year graduation rates and the percent of the senior class that is employed upon graduation or enrolled in further education, including information on earnings and field of employment."
  • Require "state and local" colleges and universities to "set multi-year tuition and fee levels for each cohort of students at the beginning of each student's freshman year, so students and families will have a sense of how much their costs will be in the coming years."
  • Have colleges submit information to the Education Department about the financial aid awarded to a "typical range of low to high income students" in their freshman and sophomore years, so that the federal agency can develop a "cost calculator" to help students and families anticipate their likely out of pocket costs at a particular institution.

Clinton's approach also offers a vaguely worded warning that she is at least partially sympathetic to the scrutiny that some of her colleagues in the Senate are applying to college endowments and whether they are spent wisely. While Clinton applauds the numerous selective colleges and universities that have altered their financial aid policies to make them more affordable for needy students -- calling them "real leaders in the fight to expand access to low-income students and students of color" -- she also notes the relatively small proportion of students at most elite colleges who qualify for Pell Grants. She stops short of endorsing proposals that might alter federal law to require colleges to spend a minimum proportion of their endowments each year.

But her campaign announcement says: "Hillary is challenging some of the most selective schools in the U.S. to further expand access for low-income and minority students by spending a greater percentage of their endowment annually on recruiting more low-income students and students of color, supporting them so that they graduate and growing the pipeline of students that are prepared to compete for admission to the most selective schools. The endowments of the 12 wealthiest universities total $155 billion and in recent years have gotten tax-free returns of almost 20 percent. These elite institutions benefit tremendously from their tax-exempt status as well as from federal student financial aid and research grants."

Just as those are likely to be fightin' words for some college officials, Clinton's proposal to pay for the increased spending on student aid by ending the guaranteed loan program (as well as using savings from freezing the estate tax at $7 million per couple rather than repealing it altogether) set off warning bells for those in the student loan industry. They said they doubted that there were meaningful additional savings to be wrung from the loan programs after Congress just cut $22 billion from lender subsidies in the budget reconciliation bill that President Bush signed last month.

After those cuts, "the savings from eliminating the guaranteed loan program wouldn’t amount to a hill of beans, relatively speaking -- certainly not enough to make a dent in the proposal’s $8 billion in new annual spending," said Kevin Bruns, executive director of America's Student Loan Programs, an advocacy group. "The student loan community hopes that Senator Clinton will reconsider this part of the proposal and recognize the value to borrowers of choice. Families are as entitled to choice in federal student loans as they are in health care and other areas. The guaranteed loan program is America’s student-loan choice program.”

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