This Democratic Senator Has a Plan to Make College Debt-Free for All

Brian Schatz.

The cost of college is too damn high. Between 1988 and 2016, the median household income in the United States grew by a little over 11 percent — while the average price of a four-year education at a public college in the U.S. increased by over 200 percent.

This eye-popping inflation did not prevent an ever-growing number of America’s young people from seeking higher education. The deteriorating wages and working conditions facing blue- and “pink”-collar laborers in the deindustrialized, deunionized U.S. of A. was more than enough to make advanced diplomas look like bargains, even at extortionary prices — and student loans papered over the gap between the average college freshman’s heightened aspirations and her family’s stagnant earnings. Meanwhile, policymakers assured the public that this whole system would prove sustainable, as the demand for “high-skilled” labor was so great, students would have little trouble paying off their debts with the fat paychecks they’d begin collecting right after graduation.

But policymakers were wrong. And now, 44 million Americans collectively carry $1.4 trillion in student debt — a giant pile of financial obligations that doesn’t just burden individual borrowers, but also the nation’s entire economy. The combination of these unprecedented debt loads — and the stagnation of entry-level wages for college graduates — has depressed the purchasing power of a broad, and growing, part of the labor force. Many of these workers are struggling to keep their heads above water; 11 percent of aggregate student-loan debt is now more than 90 days past due, or delinquent. Others are unable to invest in a home, vehicle, or start a family (and engage in all the myriad acts of consumption that go with that).

The Republican-controlled Congress has produced roughly zero serious ideas for addressing this crisis. But Democrat Brian Schatz has.

Last week, the senior senator from Hawaii introduced the Debt-Free College Act of 2018, which aims to make it possible for any college-ready American to pursue a bachelor’s degree — secure in the knowledge that he or she will be able to graduate without taking on a penny in debt.

The plan is structured as a voluntary partnership between Uncle Sam and state governments. The federal government would offer to match any participating state’s higher-education funding, dollar for dollar, if said state commits to providing need-based grants that enable all public-university students to shoulder the full costs of a college education without taking on debt. Such a program would cost $80.1 billion during its first year of operation — when, just by matching states’ current levels of higher-education spending, the program should enable ten states to immediately provide debt-free college, according to Schatz’s calculations. If all states choose to opt-in — and make the spending increases necessary to make their public colleges debt-free — the program’s price tag will rise to $95.4 billion.

Last week, New York spoke with Senator Schatz about his bill’s promise, and its potential liabilities. Our conversation has been edited for clarity and concision.

So, the most high-profile alternative to your plan, at present, is Bernie Sanders’s bill to make public universities tuition-free for all enrollees. In a sense, your proposal is both more and less ambitious: It would still allow public universities to charge tuition to students with the means to pay it, but would make higher education completely debt-free for all public-university students (which is something that Sanders’s plan ostensibly wouldn’t do). Can you explain the importance of the distinction between “tuition-free” college and “debt-free” college, and why you think the latter concept is preferable?
Nationally, the average cost of tuition is $8,900 a year. But the average cost of attending college [between housing, books, and other living expenses] is about $20,000 a year. So, what we know is that free tuition would be spectacular; but it would only cover 45 percent of the costs of attending a two- or four-year institution. When we worked with the organization that represents students, they were unequivocal: They want debt-free college. And for many of those students, that has to include the total cost of attendance. That’s how the Pell Grant system works, in that you get a flat dollar amount and you can use it for tuition, or room and board. That’s why we took this approach.

America needs to allocate more money to a lot of different public goods and social needs — or so progressives suggest. Why should college affordability be a top-tier priority for Democrats?
For the first time in American history, it’s not clear whether or not it’s smart for a 17-year-old to enroll in college. It absolutely depends on the debt load and the quality of the institution. That is a change from the way things always were, and frankly, the way things always should be. It should always be a good idea to go to college. But, we have created a system in which kids are buried in so much non-dischargeable debt that they can never crawl out from under the burden. That is not just an immoral policy from the standpoint of individuals and their families, it’s also incredibly stupid economic policy to create a disincentive for our young people to pursue higher education.

What would you say to someone who asks: Why should the government spend all of this money helping college kids, when there is so much demand in our economy for work that doesn’t require a higher education. According to Labor Department projections, of the 30 occupations that will add the most jobs to the U.S. economy in the next six years, only five require bachelor’s degrees. This country is poised to have a ton of demand for home health-care aides, warehouse workers, and food-service employees. So, why should the government subsidize the living expenses of young people going into high-wage occupations, while doing nothing to subsidize the young adulthoods of Americans who are pursuing urgently needed blue- and pink-collar work?
Well, first of all, I think we should invest in workforce training at every level. And this program also applies to two-year institutions. But I don’t think we should take it as inevitable that our young people ought to be preparing for futures in low-wage, low-skill jobs. We still have to be committed, as a matter of principle — and also as a matter of policy — to having the most highly educated workforce on the planet.

For reasons of global competitiveness, or?
Right. The idea that we’re just going to throw up our hands and say that because of a structural change in our economy, we should just be funneling our young people into jobs that don’t require educational attainment is antithetical to the American Dream of striving and achieving. I just believe strongly that anybody who wants to pursue additional education after high school ought to be given that chance.

Even if this bill passes, the fiscal pressures that have led states to disinvest from higher education aren’t going to go away. This bill won’t address the rising costs of health care, pension obligations, or the corporate subsidies that states often believe necessary to compete for large employers. So, I’m wondering, is it possible that fiscally challenged states could try to game this proposal?
No, but it’s a good question. I’ve actually asked that very question: How do you make sure, say, that tuition revenue doesn’t land in the general fund, and then get appropriated out to trigger federal spending? We’ve walked through the ways this would be manipulated, and we’re comfortable that our bill would not allow any of those.

So, even if it’s not gameable, a one-to-one federal match is nice, but a lot of Republican-controlled states refused to take the federal government up on a nine-to-one match for Medicaid expansion. Are you concerned that your approach will leave needy students in conservative-leaning states behind?
I am. But, you know, the way I look at this is, it was not until 1982 that Arizona finally agreed to take Medicaid money in the first place. So, there may be states that, for ideological reasons, want to essentially punish students. But this still allows those states that are making additional investments to help their kids. And in the long run, states that don’t participate will see that they’re suffering. You’ve seen over the last six months, now that the ACA [a.k.a. Obamacare] fight is mostly in the rearview mirror, Republican legislatures and governors are quietly accepting the Medicaid-expansion money. So, we have to get the bill passed first. But getting Republican states onboard is a real challenge for the future.

So, I’ve heard you’re not crazy about this question, but how are you going to pay for it?
There are a number of pay-fors out there, including reversing the most egregious of the recent tax cuts for the most profitable corporations in human history. But I just reject the idea that only progressive ideas have to be paid for. If it’s defense spending, nobody even considers paying for it. If it’s a tax cut, nobody really talks very seriously about paying for it. But when it comes to a progressive priority, even liberals scurry around, wondering what the pay-for is — and I just reject the premise of a totally unfair debate. Democrats have to stand on principle and say, “If you’re going to load up the most profitable corporations in human history with an unneeded and overly generous and unpaid-for tax cut, then you don’t get to turn around the next week and tell me that higher education must be offset.”

I’m very sympathetic to that argument. But ultimately, Republicans did have to phase out their tax cut to pass it through budget reconciliation (a procedure that allows the Senate majority to pass bills with 51 votes, if said bills don’t increase the deficit a decade after they’re passed). And it seems unlikely that there will be 60 liberal Democratic votes in the Senate anytime soon. So, eventually — barring the abolition of the filibuster — you’re gonna need a pay-for, right?
A couple of things: First, this program is scalable, so we can make down payments and climb the hill to get all the way to where we want to go, eventually. And second of all, if there’s a conversation about revenue in the future, it’s not that I’m unwilling to negotiate. It’s just that Republicans are tactically skillful about never talking about paying for what they want, and Democrats are always very earnestly trying to satisfy the 13 people who are still doing Third Way work on K Street, and it’s a game that disadvantages Democrats, and I don’t want to play it anymore.

To that point: Your two-page primer on the bill suggested that it actually might pay for itself, at least in part, by stimulating higher economic growth. Is that correct?
That’s right. There’s plenty of research that shows investing in higher education generates a return on that investment as high as 10 percent annually. And so, at the appropriate time, we’ll conduct an analysis that indicates that this is a smart investment and that, in the end, it will be fiscally sound. But again, it’s just an absolutely unbalanced conversation because I have never heard a Republican talk about paying for anything that they’re talking about. I mean, they just — they just walk around talking about deficits when it’s a Democratic priority and ignoring deficits when it’s a Republican priority, and we just have to, in rhetorical terms, be somewhat violent in our disagreement with this trap we’ve laid for ourselves.

So what do we do about the Americans who have already been failed by policymakers — the millions who are already saddled with student debt that’s preventing them from pursuing their desired career, or starting a business, or a family, or moving out of their parents’ apartments? Do you have any ideas for how to help them?
I think we have to push to reduce the student-loan interest rate for existing debt. And the most egregious thing we do to these borrowers is, we make this debt non-dischargeable. And that is a matter of federal law, and nobody can explain or justify that law — other than that it advantages the United States Department of Education, and other lenders.

This Democrat Has a Plan to Make College Debt-Free for All