Clinton's student loan plan depends on states participating. That's a problem.

In a post on the 25th anniversary of the Americans with Disabilities Act, I noted that its approach of imposing national standards on local governments—akin to plugging up the holes in Swiss cheese, according to one advocate for the disabled—has fallen out of fashion. Hillary Clinton’s plan to reduce student-loan debt is another indication that the behavior of state governments puts limits on how much Washington can do to address a problem.

As The New York Times reports, Clinton’s proposal includes $175 billion in grants to states “that guarantee that students would not have to take out loans to cover tuition at four-year public colleges and universities.” In exchange, the states “would have to end budget cuts to increase spending over time on higher education, while also working to slow the growth of tuition.”

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This approach makes sense. Any federal assistance to public colleges runs the risk of encouraging states to cut their own spending on schools, and any plan that simply helped students pay their bills could become a perverse incentive for schools to raise tuition. Both things are already happening without any help from Clinton. The Times reports that many states have slashed spending on public colleges and universities over the past decade, and tuition and fees for state residents “at public colleges nationwide have increased by more than 40 percent after adjusting for inflation.”

It would be tempting to think that Clinton, or whoever is the next president, could change these trends by promising cash to states that play along—if we hadn’t seen what’s happened with the Affordable Care Act. Five years after “Obamacare” was signed into law, 19 states, including Florida and Texas, are still refusing federal funds to expand Medicaid programs. Under the ACA, the federal government pays for at least 90 percent of the cost of each state’s Medicaid expansion, but some Republican-dominated states are refusing the largesse, out of a fear that the feds will someday shift more of the burden to the states and/or an ideological objection to a bigger government role in health care.

The same political dynamics would affect any new law that resembles Clinton’s proposal, writes the Atlantic’s Tyler Bishop: “It is easy to imagine conservative state and local officials rejecting this as a gross expansion of the federal government’s power.” That argument would be even stronger than it has been with the ACA. Under Clinton’s proposal, states would have to prioritize spending on public education or risk losing a lot of money. Many governors and state legislators will see this as usurping their own power to write budgets and set tax rates, and will reject the “bribe” to put public colleges and universities at the head of the line.

Some states, especially those with cold climates and high property values, see an educated workforce as their best way to attract employers and generate economic activity; they are likely to embrace any proposal that rewards them for spending more on schools. Other states, mostly Republican and mostly in the Sun Belt, see a low tax burden as their greatest asset, and they’re likely to reject any deal that compels them to pump more money into public higher education. As Bishop writes, “this would leave states that are already underperforming on higher education with less to spend, even as it rewards many of those that are already excelling.” Clinton’s plan to slash student debt, in other words, would leave Swiss cheese holes over much of the country.

Another result is that residents of states that refuse to participate in the federal program would still be paying federal taxes that go toward the states that do accept the grants and conditions—in the same way that residents of states that have refused to expand Medicaid are still helping to pay for the expansion elsewhere. This scenario is probably enough to sink any proposal that resembles Clinton’s, at least as long as the Republicans still control Congress. Her proposal may appeal to voters, but anyone who wants to see real relief from high tuition and student-loan debt will have better luck appealing to their own state legislature, not Washington.

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Tom Fields
2 years 11 months ago
NO, NO, NO! the slogan of the Democrats is "vote for me and I will send you a check". 1. College is overpriced--because of government loans and subsidies. 2. A BA in ethnic studies gets you a waitress job---maybe. 3. If you want a degree---work for it-- 4. WE DESPERATLY NEED A TRADE-SCHOOL SYSTEM BUT THAT DOES NOT GET DEMOCRAT VOTES!

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