Student loan debt is a $1.3 trillion crisis. Student loan debt is second only to mortgage debt in the United States, meaning people owe more in student loans than they owe on auto loans and credit cards.
This crisis hasn’t gone unnoticed in Washington. Many politicians have made an effort to fix this crisis before it spirals out of control. Some of the boldest ideas come from self-proclaimed “democratic socialist” Bernie Sanders.
The politician has sponsored the College for All Act. This act could put an end to student loans or at least slow the borrowing down considerably.
The College for All Act
When Bernie Sanders ran for president in 2016 he talked about making college tuition free for Americans. He said it should be free just as grade school, middle school, and high school are free. These days, people often can’t find gainful employment without a college degree, so making it free could be a way of helping people to achieve their goals.
In 2017 Sanders backed that idea up with the College for All Act. This act would allow students with family incomes of up to $125,000 to attend public colleges free of charge. According to Sanders, the bill will benefit around 80 percent of college-aged people.
It will also eliminate or reduce the fees and tuition at private universities that typically serve underrepresented minorities. At least $1.3 billion will go to these schools, including Historically Black Colleges and Universities, each year.
Those who go to college for free won’t have to take out student loans. The other 20 percent still might need to apply for student loans if this bill is passed.
Understanding that student loans cannot completely go away, the College for All Act slashes interest rates in half for new borrowers. That would put the current rates at around 2.5 percent.
What about Students Who Already Owe Student Loans?
Sanders didn’t ignore students who already owe money when he created the College for All Act. Existing borrowers would be able to refinance their loans with the new interest rates. That means they could refinance and reduce their interest rates to around 2.5 percent.
Special Help for Low-Income Students
Bernie Sander's student debt plan has special provisions for low-income students. For instance, low-income students who receive Pell Grants could use the money for all of the costs associated with college instead of just tuition and fees.
The bill also requires all states that participate in the College for All Act cover the real cost of college for low-income students. This refers to the costs students incur after paying for tuition and fees.
In addition, the act offers a dollar-for-dollar match when states pay extra funding for transportation, books, housing, and more. This will likely encourage more states to jump onboard.
It also triples the investment in the Work-Study Program which helps low-income students attend college. The investment should allow the Work-Study Program to reach an additional 1.4 million students. Students will have extra money for living expenses if they’re able to participate in the program.
No More Profits for the Federal Government
Sanders also notes that the federal government turns a profit in the student loan business and he wants to put a stop to that. He states that the government will make around $70 billion in profits off of student loans in the next decade. His new plan has a provision that forbids the government from making any money off student loans.
That is why the interest rates will be so low. The government won’t profit, so interest rates can be slashed.
Paying for the New Plan
Bernie Sander's student debt plan will cost an estimated $600 billion. The federal government will not be able to make money from interest to pay for the plan.
Instead, Sanders intends to impose a “Wall Street speculation tax” of 0.5 percent on stock trades. In addition, he intends to impose a fee of 0.1 percent on bonds and 0.005 percent on derivatives. This would allow the government to raise all of the money needed in approximately ten years.Students who are in or planning to enroll in college should keep an eye on the College for All Act. It’s recently been introduced in congress and there will likely be some debate about its merits before it goes up for a vote. If it makes it through and becomes law it could ease the burden many students face when attending college.
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