When asked about the biggest threats to this country, one might think of ISIS or racial turbulence or even global warming, but most Americans probably wouldn't think of student loans. Student loan debt, however, is one of the biggest threats to the U.S. economy. The $1.2 trillion debt has already weakened the country's economic activity, and will continue to do so unless it is curbed. Therefore, any serious U.S. presidential candidate should make this one of their core issues. That's why Hillary Clinton and Bernie Sanders outlined plans to combat this growing crisis. But how their proposals compare?
To illustrate just how severe this problem is, MarketWatch teamed with educational data site StartClass to create a "national student loan debt clock," which shows the debt's astronomical dollar amount — which is growing by $3,055.19 every second. This daunting number reflects the total debt of 40 million Americans. (70 percent of students are now graduating with such debt.)
The current crisis can be attributed to several factors. Tuition costs have continuously risen in the last decade, while the recession has forced many states to slash their education budgets and halted income growth. As a result, the growing pool of post-recession college graduates are graduating with more and more loans, contributing to the overall nationwide debt.
Clinton and Sanders have both proposed comprehensive plans to combat this very sobering reality. Here's a side-by-side comparison of each one.
What Are The Plans Called?
Hillary Clinton: The New College Compact
Bernie Sanders: The College For All Act
How Will The Plans Work?
Hillary Clinton: Under her plan, each state will receive a portion of $175 billion in grants if it agrees to end budget cuts, increase spending on higher education, and work to decrease tuition costs. Basically, states will be rewarded if they help students attend four-year public colleges and universities without having to take out loans. Borrowers will be able to refinance their loans based on current rates.
Bernie Sanders: Similarly, Sanders' plan would allot $47 billion per year to states that cut tuition costs and fees at public colleges and universities. The College For All Act would also lower student loan interest rates by nearly half. Sanders' plan would also allow students to refinance at current rates.
The Specifics Of Each Plan
Hillary Clinton: In addition to tuition costs, the New College Compact will reduce students' living expenses, and provide free tuition for those who attend community college. Students will have to contribute, however, by applying earnings from 10-hour-per-week jobs, and families must also make a "realistic" contribution. All students will be eligible for an income-based repayment plan that ensures borrowers will never have to pay more than 10 percent of their income.
Bernie Sanders: In order for states to receive federal funding, they must maintain spending on need-based financial aid and quality academic faculty. The funding shall not be used to increase administrator salaries, merit-based financial aid, or non-academic buildings (like stadiums).
How Much Would The Plan Cost?
Hillary Clinton: $350 billion over 10 yearsBernie Sanders: $750 billion over 10 years
How Will They Finance Their Plans?
Hillary Clinton: Clinton will cap the value of itemized deductions that high-income families can list on their tax returns.
Bernie Sanders: Sanders will finance his plan with a "Robin Hood Tax on Wall Street," which would impose a speculation fee of 0.5 percent on stock trades, 0.1 percent fee on bonds, and a 0.005 percent fee on derivatives on investment firms, hedge funds, and other speculators. Sanders says that such a provision could raise hundreds of billions of dollars a year to go toward not only free tuition, but also job creation. Image: Cory M. Grenier/Flickr