As student debt continues to climb and reform fails to materialize, it’s not surprising that some politicians are capitalizing on their constituents’ frustration. In fact, some of the brightest stars on both sides of the partisan divide are taking up the cause of student loan reform.
Senator Marco Rubio, who seems likely to run for president, understands that Mitt Romney’s economic message failed to connect with voters—especially millennials. To attract these younger voters, many of whom have grown disillusioned with the Democrats, he’s embracing student loan reform.
Rubio is familiar with the problem of student debt. After graduating law school, he amassed over $100,000 in student loan debt. “At one point in my life,” he recently claimed, “it was the single-highest expenditure in our personal budget.” Rubio only was able to pay down his debt in 2012 with proceeds from his autobiography. He can therefore identify with the many students whose student loan repayments prevent them from entering adulthood.
So far, he’s proposed two solutions. The Know Before You Go Act, pushed for greater disclosure on schools’ graduation rates and their graduates’ loan debt, employment prospects, and future earnings. The Investing in Student Success Act seeks to create a legal structure for income-share agreements (ISAs), private arrangements in which investors front tuition cash to students in exchange for receiving a portion of the student’s future income. More recently, Rubio called for an automatic enrollment of federal borrowers into an income-based repayment system. Though income-based repayment is most often associated with Democrats, Rubio calculates that adjusting the way (not whether) student debt is repaid will appeal to indebted young voters.
On the other side of the aisle is Senator Elizabeth Warren, whose embrace of economic populism has also led her to pursue student loan reform. In May 2013, Warren introduced the Bank on Student Loans Fairness Act, which offered the incredibly low interest rate government offers to large private banks to student borrowers.
Warren has also lamented the amount of money the federal government makes off student loan borrowers. In July 2013, Warren claimed that the government would make $51 billion off of student loan interest. A year later, Warren’s estimate ballooned to $184 billion. To be sure, government’s accounting of student loans is very arbitrary, and the same government agency which at one time forecast the $184 billion profit also predicted a $95 billion loss. Experts have also disagreed with her. But to public hungry for economic populism, her critique makes for excellent headlines. Warren cast the choice of supporting her bill, which didn’t pass, in very stark terms. “Anyone who says that we can’t afford this amendment,” she argued, “is saying, in effect, it is more important to keep making profits off the backs of our kids than to ask millionaires to pay just a tiny bit more.”
More recently, Warren proposed a bill which would allow some borrowers with federal student loans to refinance at lower rates. Warren proposed paying for this fix by levying new taxes on individuals earning over one million dollars per year. And in August, Warren was one of only two other Senators (the other was Dick Durbin, D-IL) to support Senator Sheldon Whitehouse’s (D-RI) medical bankruptcy bill that, among other things, proposed that “medically distressed” students be allowed to discharge their student loans.
Rubio and Warren’s competing approaches to student loan reform reflect their respective political convictions. Rubio hopes to promote innovative, market-driven ideas like ISAs that can help middle-income Americans without over-involving the government. Unlike some of his colleagues on Capitol, his willingness to work with Democratic senators on these proposals indicates that he’s not a strict partisan warrior. Warren, who trades in economic populism, is interested in top-down government interventions to alleviate student debt. Though they might disagree on the best solution to the debt crisis, one thing seems certain. Given growing discontent over this issue, their student loan reform efforts might make the difference when they seek their party’s nomination for the upcoming presidential election.