Federal policy

Report on for-profits in six countries finds similar problems and few benefits

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U.K. report on for-profit colleges in six countries finds few benefits of sector and calls for tighter regulation, while acknowledging lack of data makes it hard to set rules.

Hillary Clinton student loan proposals are a giveaway to Silicon Valley

Yesterday, Hillary Clinton offered new student loan forgiveness proposals as part of a broader set of ideas on technology and innovation. 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.

If Clinton wants to give away money to people who will eventually be wealthy, this proposal is a great idea. People working in tech start-ups will likely go on to earn a fairly high income in life. If a young entrepreneur has a degree from a good school and highly valuable skills, she can still get a high-paying job even if the company fails. If her company succeeds, she will eventually have a lot of money.

Clinton's Innovation Agenda
The presumptive Democratic
nominee outlines her plan
for spurring innovation,
in part through changes
in higher education.

That person doesn’t need an interest-free loan. What she needs is a program that allows her to pay a low amount or nothing toward her student loans while she makes little to no money launching her business. Interest will accrue, but once she earns a lot, she’ll be able to pay everything back. If she never makes a lot, the loans will eventually be forgiven.

Of course, that plan is already available to all federal student loan borrowers. It’s called income-based repayment, it is used by many people, and it protects all borrowers, whether they’re “innovators” or not. Clinton’s plan is a giveaway to kids who went to Stanford and attend TEDx talks for the networking opportunities.

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.”

Let’s see how that would work. Government officials would first have to define “distressed community.” Perhaps they would define it as any ZIP code where average earnings are less than 150 percent of the poverty line. That means that a bunch of Stanford graduates with master’s degrees in computer science who work out of office space in a poor part of Oakland could get $17,500 loan forgiveness after five years -- even if their company is being funded by venture capitalists. Why would we ever want that? If anything, this seems like a plan to speed up gentrification in Northern California.

But what about those businesses that help these “distressed communities”? The government will have to define “measurable impact.” How might that be done? If I invented the next Candy Crush and everyone in the neighborhood played it, that would certainly have a measurable impact on the community. Should I get loan forgiveness? If I start a farm and sell vegetables in a distressed community once a week, is that “measurable impact?”

There’s no good way to define it. When Congress tried to define “public service” for federal student loan forgiveness, it ended up counting any job with the government or a nonprofit. Which raises another question: the government already has public service loan forgiveness, so for whom, exactly, is Clinton’s proposed program? This election cycle, Clinton herself has seemed increasingly skeptical of greedy, for-profit businesses. If someone really wanted to help a community, why wouldn’t they just start a nonprofit?

Clinton seems to want more young people to start businesses. And while some economists are concerned that few young people are doing just that, it’s probably because of changes in demographics and the economy rather than young people having to pay interest on student debt. Students already have income-based repayment, which allows them to have affordable monthly payments. Those looking to help poor communities already qualify for public service loan forgiveness.

Our obsession with student loans leads to some terrible policy choices. With her new proposal, Hillary Clinton may be cultivating her next generation of Silicon Valley donors, but that’s not the same as prudent policy.

If anyone should get loan forgiveness, it’s not “innovators” who go on to earn high incomes, but those who never earn a high income. And it shouldn’t be for college graduates who start a business in a “distressed community,” but for borrowers who went to predatory schools and can’t find work. Those are the truly distressed.

Alexander Holt is a policy analyst with the education policy program at New America.

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Gage Skidmore

U.S. expands Pell Grant program to 12,000 in prison

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After receiving 200 applications, U.S. Education Department releases a list of colleges that will offer need-based grants to prisoners pursuing a degree.

CFPB Lacks Authority Over For-Profit-College Accreditors, Judge Rules

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Federal judge rules Consumer Financial Protection Bureau lacks the authority to investigate for-profit-college accreditors.

Federal spending protects most vulnerable students from state disinvestment, study finds

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Low-income and nondependent students have been protected from state disinvestment in higher education during the last two decades because of increasing federal aid spending, a new study finds.

Obama administration plans to revamp how Education Department collects student loans

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After years of criticism from companies it hires to collect student loan payments, the Education Department plans to create a single standardized portal for borrowers to make payments.

Nonprofit owner of former Corinthian Colleges campuses loses $100 million while overhauling career college chain

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Nonprofit Zenith Education Group is consolidating or closing 10 more campuses of the former Corinthian Colleges. The chain lost $100 million last year and is making changes to its business model, curriculum and leadership.

Bill Clinton speechifies on Hillary Clinton's plans for debt-free public college

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Bill Clinton hits the stump this week to make the case for Hillary Clinton's college affordability plan, criticizing states' "underfunding" of public higher education.

Why colleges use financial aid to attract wealthier students

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The number of Pell recipients a college enrolls doesn't tell the whole story, a report says. Institutional aid and how much low-income students end up paying also matters.

Ben Carson to advise Trump campaign on education

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Donald Trump says Ben Carson will play a "big role" advising the Trump campaign on education. So what has the retired neurosurgeon said about higher education?

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