Donald Trump’s higher ed ‘plan’ will explode the student debt crisis

Trump is disguising a giveaway to Wall Street banks as a solution to the student debt crisis.

CREDIT: AP Photo/Cliff Owen
CREDIT: AP Photo/Cliff Owen

In coming out with a student debt “plan” just 26 days before the election — and 484 days into his campaign — Donald Trump is trying out another con on American voters, disguising a giveaway to Wall Street banks as a solution to the student debt crisis.

During a speech in Ohio last week, Trump claimed he wants to make sure young people don’t carry debt as “an albatross around their necks for the rest of their lives.” He proposed an income-driven repayment plan that would cap student loan payments at 12.5 percent of a borrower’s income and then forgive the loans after 15 years.

Sounds good, right? In fact, it sounds a lot like President Barack Obama’s reforms.

But wait a second. Trump has said many times that he wants to shut down or reduce to shreds the Department of Education, and the Republican party platform calls for getting the federal government out of student loans. If Trump successfully eliminated federal loans, students would have to borrow from private lenders. That means that when their debts were forgiven after 15 years, the government would have to pay back the banks for all that unpaid debt — hundreds of billions of dollars each year in giveaways to Wall Street.


And how would borrowers fare during that decade and a half they would be paying down their loans? Many of them would see their interest rates skyrocket. The average federal borrower currently pays only 4.75 percent interest. In the private market however, borrowers with worse credit or no co-signer pay interest rates ranging from 9.5–19 percent. If Trump privatized the student loan market, new borrowers with lower credit scores could end up paying between $7,340 and $24,470 more over the life of their loan. Monthly student loan payments could jump by as much as 78 percent.

Even worse: many low-income students would lose their opportunity to go to college altogether as banks wouldn’t consider them a good bet to lend to, leaving these individuals unable to afford college.

Among other problems with Trump’s proposal is the failure to address state disinvestment in higher education, the real root of the student debt crisis.

In his remarks last week, Trump also seemed to imply that he is considering the elimination of other programs to help borrowers, like Public Service Loan Forgiveness. But of course, there is no way to be sure if that is what he intends, as his campaign has yet to release any real plan.

Finally, Trump also railed in Ohio against what he called administrative bloat and the burden of government regulations, citing a discredited study that wildly exaggerates the cost to institutions of dealing with federal regulations. In light of the recent collapse of both Corinthian Colleges and ITT Tech due to their harmful deception of students, de-regulation of schools is the last thing we need in higher education.


Trump’s call for deregulation is all too convenient coming from the man who built his own predatory “school.” Trump University, the candidate’s now-defunct company that is the subject of several lawsuits, preyed on vulnerable people who put tens of thousands of dollars on credit cards to chase empty promises of mentoring in the real estate business.

Trump’s student debt “plan” will ultimately harm borrowers — and does nothing to arrest college costs or give students an affordable path to a degree. We know that young people are more likely to vote for candidates who propose plans that deal with higher education and student debt. But with just 26 days to go until Election Day, Trump’s swing and a miss fails to provide concrete plans and gave us nothing but empty rhetoric.

Hannah Finnie is a Senior Policy and Communications Associate with Generation Progress Action Fund, the Millennial engagement arm of the Center for American Progress Action Fund. Maggie Thompson is the Executive Director of Generation Progress Action Fund.