Foundation

Clinton’s Expanded “New College Compact” to Add $100 Billion to its Already $350 Billion Cost

by Demian Brady / /

In a nod to Bernie Sanders, who officially endorsed the Clinton campaign this Tuesday, Hillary Clinton expanded the scope of her college tuition proposal. As originally crafted, Clinton’s New College Compact sought to provide debt-free tuition. The centerpiece of the Compact was a grant program to provide for tuition-free education at community colleges, adopted from President Obama’s $6 billion per year “America’s College Promise” budget proposal.

Clinton’s college plan includes:

  • New grants to states that agree to significantly reduce tuition at their schools;
  • Creating a $25 billion fund for Historically-black Colleges and Universities;
  • Allowing borrowers to refinance their federal student loans at new, lower rates, offering debt forgiveness after 20 years (for those who make their payments consistently); and,
  • Permanently extending the American Opportunity Tax Credit, a refundable credit available to filers in excess of any tax liability, which resulted in outlays of $4.3 billion in FY 2015.

Students would be expected to work ten hours per week and their families would be required to make an “an affordable and realistic … contribution” to their education. The campaign had said the Compact would “cost in the range of $350 billion over 10 years – and will be fully paid for by limiting certain tax expenditures for high-income taxpayers.”

During the primary debates, the candidates sparred over their respective plans. Sanders sought to “make every public college and university in this country tuition-free” at an annual cost of $75 billion.

Clinton countered:

Senator Sanders has talked about free college for everybody. He’s talked about universal, single payer health care for everybody. And yet, when you ask questions, as many of us have and more importantly, independent experts, it’s very hard to get answers.

And a lot of the answers say that this is going to be much more expensive than anything Senator Sanders is admitting to. This is going to increase the federal government dramatically. And, you know, my dad used to say, if it sounds too good to be true, it probably is.

Clinton’s revised plan embraces Sanders’ more ambitious proposal by offering tuition-free education at public colleges and universities. During the first year, the program would be available for students from families earning up to $85,000. The income ceiling would increase by $10,000 each year over the next four years, and would be capped at $125,000 in 2021. Above-average income earners would be eligible for the program: the median income in the United States was reported at $57,263.  According to the latest data from the IRS based on 2013 tax returns, individuals earning at least $87,434 were among the top 20 percent of earners and the top 10 percent earned at least $127,695.

In addition, Clinton calls to:

  • Restore year-round Pell Grant funding. While the program was eliminated in 2011, President Obama proposed to restore it in his FY 2017 budget at a cost of $2.635 billion over ten years.
  • Defer federal loan payments and interest for three years for certain individuals who start a “business or social enterprise.”
  • Expand loan forgiveness programs for public service. Those eligible would include AmeriCorps’ paid-volunteers and teachers who serve in high-need areas. At a six-year cost of $1.679 billion, Obama’s FY 2017 budget proposes to consolidate existing teacher loan forgiveness programs and to expand loan forgiveness for teachers who serve in low-income schools beginning in 2021. However, a cost estimate is indeterminate for Clinton’s proposal.
  • Use executive authority to implement a 3-month moratorium on federal student loan payments. During this period, individuals would be encouraged to refinance their existing loans.

While the outline of the proposal declares, “Costs won’t be a barrier,” there is no indication of what the additional costs might be to cover the tuition of 83 percent of families by 2021. An unnamed Clinton campaign staffer told the Washington Post that the plan would increase the cost of the Compact by $10 billion a year. NTUF believes this is likely a low estimate given the number of students that would be covered and the potential for an increase in demand for “free” education at public institutions. While a projection of that is unavailable, we do now that in 2015, about 14.8 million students were enrolled in public colleges and the national average annual cost for public, four-year, in-state tuition (including fees, room, and board) was $9,410 – ranging from $7,083 in the south to $12,007 in New England.

It is unclear how this would be financed. The Clinton campaign told the New York Times that the expansion would be covered by closing tax loopholes, particularly those used by hedge funds and private equity firms. But, Mrs. Clinton had already proposed to close two such loopholes: carried interest (projected by the Joint Committee on Taxation to increase revenues by $19.6 billion over ten years) and another related to hedge funds and foreign reinsurance companies known as the “Bermuda reinsurance loophole” (estimated by the Obama Administration to increase revenues by $7.7 billion over ten years). However, Clinton had already signaled in January that these loopholes would be closed to help pay for her infrastructure and education proposals.

NTUF's analysis of Clinton's complete campaign agenda is available at CandidateCost.org.


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