WSJ Your Money Briefing - Your Money, Your Vote: What the Election Could Mean for Student Loans

Episode Date: September 29, 2024

In the third episode of our series “Your Money, Your Vote,” we delve into the presidential nominees' positions on student loans and the cost of higher education. In the wake of the Supreme Court's ruling against President Biden’s student-loan forgiveness plan, the administration has shifted to a more fragmented approach to address student debt. We’ll look into whether Vice President Kamala Harris will carry on Biden’s initiatives. And we’ll explore former President Trump’s views on student loans, including how they have evolved, if at all, in his current campaign. J.R. Whalen hosts. Sign up for the WSJ's free Markets A.M. newsletter.  Learn more about your ad choices. Visit megaphone.fm/adchoices

OCI is the single platform for your infrastructure, database, application development, and AI needs. Do more and spend less like Uber, 8x8, and Databricks Mosaic. Take a free test drive of OCI at oracle.com slash wall street. Here's your money briefing for Sunday, September 29th. I'm JR Whalen for The Wall Street Journal. This is the third installment of our special series, Your Money, Your Votes. Today we're focusing on where the 2024 presidential candidates stand on something that can cost anywhere from a few grand to hundreds of thousands of dollars, a college degree.

And many people borrow money and go into debt to pay for that degree. More than 43 million people in the US currently hold federal student loans, totaling more than $1.5 trillion, according to the Government Accountability Office. Last year, President Joe Biden's broad forgiveness plan was struck down by the Supreme Court.

Since then, the administration has rolled out programs that wipe out college debt for some groups, but efforts to get widespread forgiveness have been tied up in courts. The uncertainty has left many Americans in a tough spot. I'm going to be looking at essentially almost half a million dollars worth of student loan debt, which is crazy to even say out of my mouth. That's 27 year old Aminta Scott. She's a second year medical student in Indianapolis. She's taken out a mix of private and federal loans to finance her undergraduate and master's degrees, and is now on her way to a medical degree. One of the things that I kind of have to sacrifice is to a medical degree. One of the things that I kind of have to sacrifice is financial freedom, or at least obtaining

it much, much later in life. Like I truly don't expect to even be looking at that until mid-40s earliest, probably around my 50s. There's just a lot that I'm set back with this career. A survey from Bankrate released this June showed that almost one in five Americans say student debt will have a major influence on their vote this year, and 29 percent of borrowers say it'll be a key factor in their decision. But student debt is just part of the equation.

For example, the real cost of a four-year college degree climbed 180 percent between 1980 and 2020. So how do vice president and democratic nominee Kamala Harris and former president and Republican nominee Donald Trump compare on student loan forgiveness and tackling the cost of higher education? At the high price of a college education.

Struggling with the rising cost of tuition. The cost of a four-year degree is not only rising, but requires... Cost of education. You hear it all over the news. It's the all-in cost of school. Tuition, books, room and board. Living expenses are all jumbled into that term.

So when we're trying to answer the question about where Harris and Trump stand on tackling the cost of education and the trillions of dollars of debt because of it, we have to look at the complete picture. To start off, I wanted to know if the past two administrations, Trump in 2016 and Biden in 2020, made a dent in the cost of education. So I asked Gillian Berman.

She's a deputy editor at MarketWatch, which is part of Dow Jones, along with the Wall of education. So I asked Gillian Berman. She's a deputy editor at MarketWatch, which is part of Dow Jones, along with the Wall Street Journal. She covers student loans and consumer debt. So during the Trump administration, he took a few steps to try to deal with college costs. Probably the most famous is the endowment tax that came as part of the 2017 tax law that he pushed. And so that placed a small tax on endowments at wealthy schools.

It didn't have a huge immediate impact on college costs just because it really only hit the wealthiest schools. Those schools tend to provide a lot of financial aid. But people on both sides of the aisle have suggested that sort of taxing endowments more heavily could be one way to push schools to spend their endowments in a way that helps make school more affordable for students. A couple of other things the Trump administration did was they walked back some sort of regulations that the Obama administration had put in regarding for-profit colleges.

Critics of that would say that would put the students and borrowers at risk of paying more in college costs, but that was the step they took in the area. They also walked back student debt relief for scammed students. That was kind of a noteworthy step they took. Looking at the Biden administration, aside from tackling student debt through forgiveness plans, what did this administration do to tackle the cost of education? So one of the biggest steps they tried to take on this issue was knock down, which was they tried to create a free community college program through Build Back Better, which was the Biden administration's

COVID recovery plan. The free community college plan was one of the first things sort of dropped as negotiations over the plan took shape. That is something that Democrats have said again that they would like to do. We'll see if that's something that would come in a Harris administration, but it failed the first time around. They've also taken steps to boost Pell Grants, which is the money that the government sends to low-income students to pay for college. So they've boosted that over their tenure. They've also invested a lot in historically black colleges and universities. People would argue that an investment like that could help make those schools more affordable. And then finally, a big step that they took with the intention of making college more affordable

was to revamp the FAFSA, which is the form that students and families use to provide for financial aid. They made it a lot simpler, but the launch of that effort was filled with glitches and people worry those glitches actually threw off a lot of low income students in their sort of efforts to pay and attend college. Looking at the 2024 presidential election, are there any big plans that either side has put forward to try to dramatically reduce the cost of a college degree?

So, on the Democratic side, they haven't really talked about it much, and it appears they're going on their record of what they've already done, which was student debt forgiveness. They've attempted to reform repayment plans so that borrowers would be paying a lot less, but all that stuff has kind of been blocked at the courts. And then free community college thing, which is actually a pullback a little bit from what they committed to in 2020, which was making four-year public college free for a certain segment of

the American public. On the Republican side, President Trump hasn't said a ton on that. We know that he does not like the student debt forgiveness that's happened so far and Republicans in general don't like the efforts to reform repayment. He did pretty early on in his campaign this time around pledge to create a sort of free online university. And the idea is that the government would use money from taxes on wealthy universities endowments to fund a free online school that would compete directly with colleges and universities already on the market, would issue degrees, would provide courses.

And sort of the idea is to just find a new funding source to create a competitor to the entrenched higher education system. Oh, so very different ways to approach this. I've been following this issue of free college and efforts to bring college costs down for a long time. And this campaign cycle really marked a sort of a change where we have Democrats really are talking more about not everybody has to have a four-year degree. The Democratic Party platform is talking about investing both in community college but also

trade school. And then on the Republican side, there has been across states and in the national rhetoric growing skepticism of what we might call a quote-unquote traditional higher education. For most people, taking out loans is the path toward paying for school. But that debt often winds up being a burden on their personal finances. WSJ Higher Education reporter Melissa Korn joins me to talk about the big picture of student debt. Melissa, how is it different from other forms of debt?

It is stickier in some ways. For years, student debt was considered good debt, right? It is an investment in your future, an investment in your education. But it also is a type of debt that is much harder to get rid of in bankruptcy. It haunts people throughout their lives no matter what path they end up on in terms of jobs or other things. Up until fairly recently, it was really hard to get your debt wiped even if you had some sort of a permanent disability and you weren't able to work and earn money.

It's much harder to get student loans wiped out in bankruptcy than it is other types of loans. And the money that borrowers have tied up in loans or that they owe is money that they're potentially not spending elsewhere, Right, they are not putting down payments on houses. They are not buying or leasing cars or taking vacations or general spending. They are rethinking families, kids, all of that. All eyes have been on the November election, but the years leading up to this election

have shaped the student debt picture for millions of people. We touched on this a bit earlier, but get us into the details. What's happened under the Biden administration? When Biden took office, he promised to make college more affordable and help alleviate the burden of student debt for many borrowers. And he's tried to do that in a number of different ways.

The administration has forgiven loans for borrowers who attended predatory colleges. So they were defrauded by their schools and borrowed money for degrees that ended up being fairly worthless for many of them. They've also done student loan forgiveness for borrowers who worked public service jobs, public interest law and nonprofits,

and just working for the government for a certain amount of years. And those people have been paying off their loans regularly for a number of years, for generally about at least a decade. And then the remainder is forgiven. And this program has been around for a long time, but people weren't being approved

to have their debt wiped away until Biden revamped the program quite a bit. And you saw numbers really skyrocket. A lot of his efforts have been caught up in court battles and it's caused a lot of consternation and uncertainty for borrowers because they don't really know what programs are and aren't approved and whether they'll be reversed and all of that. So until they see their zero dollar balance, they don't really believe it's going to happen. Whether you're hopeful or just trying to plan your financial future, the next president's approach could shake up what you're paying for school. So what do the 2024 presidential candidates have planned to tackle the cost of college?

We'll chat with WSJ Politics reporter Andrew Andrew Rastusia, about it after the break. AI may be the most important new computer technology ever, but AI needs a lot of processing speed, and that gets expensive fast. Upgrade to the next generation of the cloud, Oracle Cloud Infrastructure, or OCI. OCI is the single platform for your infrastructure, database, application development, and AI

needs. Do more and spend less like Uber, 8x8, and Databricks Mosaic. Take a free test drive of OCI at oracle.com slash Wall Street, oracle.com slash Wall Street. millions of Americans are saddled with student debt and rising costs and the 2024 presidential candidates are laying out how they plan to tackle it. You look at their costs and they drive them up because the federal government gives loans to everybody so it's more expensive but somebody has to pay back that loan. It is we who have canceled debt, including student loan debt. In fact, testify if you ever received it. WSJ reporter, Andrew Rastusia has been covering the race for the White House.

Let's start with Vice President and Democratic nominee Kamala Harris. How has she approached student debt? So she has embraced what her boss, President Biden, has done. And that includes forgiving $170 billion worth of student loans for about 5 million borrowers. She's been pretty integral behind the scenes in making sure that happens. And she said she wants to go further if she were elected and she would continue the efforts that president Biden is currently engaged in to forgive loans on a large scale. She said that she particularly wants to help people who are public servants,

teachers, and people who have been defrauded by allegedly predatory for profit colleges. On her campaign website, she says that she will, quote, continue working to end the unreasonable burden of student debt and fight to make higher education more affordable so that college can be a ticket to the middle class. So that's really at the core of her campaign. Let's move on to former President Donald Trump. What has he said regarding student loans?

During the pandemic, he was the person that started this years-long pause on student loan payments and interest accrual because of the hardship that so many Americans were facing during the pandemic. He started that in March, 2020. And President Biden, when he became president, continued it all the way till September, 2023. So there were a number of years there where people with federal student loans didn't have to pay and there was no interest accruing. He framed that as a temporary measure that was specific to the pandemic.

He hasn't said a whole lot exactly on how he would approach student loans or the cost of college, but the Republican platform, which is approved by Republicans ahead of the convention in July, says that they want to make higher education more accessible by creating additional drastically more affordable alternatives to traditional four-year colleges. And they want to drive down the cost of tuition, although they haven't laid out a specific plan to do that. Both candidates, for that matter, haven't laid out extremely detailed proposals on this issue. Of course, Harris has the record of her boss, President Biden, to lean on. We'll be looking to see what more they might lay out before

the election. In terms of people who resonate with the student debt issue, which can often be young voters, how important is that group in the potential turnout this November? Well, this is going to be an extremely close election. Republicans and Democrats don't agree on much, but they agree on that.

And so every little constituency that Harris or Trump can appeal to and turn out will matter, even if it's a small group. Student debt is just one of many topics on voters minds this election along with inflation and taxes. But as voters prepare for their financial future, how can they budget and plan for the cost of health care? Join us next Sunday for the fourth and final episode of our series, Your Money, Your Vote,

where we'll discuss how the cost of health insurance and prescription drugs could change under a Trump or Harris administration. And that's it for part three of this special series of Your Money Briefing. This episode was produced by Ariana Ospreay. I'm your host, JR Whalen. Sound design by Jessica Fenton. Jessica wrote our theme music.

Our supervising producer is Melanie Roy. Aisha Al-Muslim is our development producer. Scott Salloway and Chris Zinsley are our deputy editors. And Falana Patterson is the Wall Street Journal's head of news audio. Thanks for listening. AI may be the most important new computer technology ever, but AI needs a lot of processing speed and that gets expensive fast. Upgrade to the next generation of the cloud, Oracle Cloud Infrastructure or OCI.

OCI is the single platform for your infrastructure, database, application development, and AI needs. Do more and spend less like Uber, 8x8, and Databricks Mosaic. Take a free test drive of OCI at oracle.com slash wall street, oracle.com slash wall street.