Could Student Debt Eventually Be a Thing of the Past?

When the American billionaire Robert Smith announced to students graduating from historically black Morehouse College that he would pay off their student loans, he put himself at the center of one of the 2020 US election’s key issues. While the cost of Smith’s surprise gift announced on Saturday to Morehouse’s 396-strong class of 2019 is not yet known, the body’s student debt is thought to reach $40 million.

Billionaire Pays Off Class of 2019's Student Debt https://t.co/QXTzXtO4Tk pic.twitter.com/nX1XWGYfUm

— Len Berman and Michael Riedel WOR (@LenMichaelWOR) May 20, 2019

Smith, a Texas businessman who is the wealthiest African-American, has been applauded for his generosity, but his gift also generated jealousy among the many Americans struggling with huge student debts. “Can a billionaire pledge to pay off my student loan debt? I’m glad for the graduating class, but also envious,” one Twitter user wrote, reflecting a sentiment common on social media.

Already, several Democratic challengers to President Donald Trump in next year’s elections have proposed ways to reduce the nearly $1.5 trillion American student loan burden, and even politicians who aren’t running have weighed in.

“People shouldn’t be in a situation where they depend on a stranger’s enormous act of charity for this kind of liberation, to begin with,” tweeted Alexandria Ocasio-Cortez, a rising Democratic House representative who was elected last year in part on the promise of free university education.

Mobilized Billionaires

More than two-thirds of American graduates were in debt in 2016, the Institute for College Access and Success said in April, with their burden averaging $29,650.

Paying off the debt often weighs heavily on young Americans’ lives through their 20s and 30s, delaying the starting of families and the purchase of cars and homes.  All of that affects the US economy, and Smith isn’t the first billionaire to take notice. Last November, former New York mayor Michael Bloomberg pledged $1.8 billion to Johns Hopkins University in Baltimore, from which he graduated in 1964.

Photo: Getty Images

The donation aims to make education at the elite school more affordable to low- and middle-income students, who would otherwise have to face fees and living costs totaling about $72,000 per-year.

Another billionaire, Kenneth Langone, gave $100 million to the New York University School of Medicine last year to make tuition free for its current and future students.

Tax the Rich

Student loan debt levels soared in the US between 1996 and 2012, and Senator Bernie Sanders put the rising costs at the heart of his unsuccessful 2016 presidential campaign.

The following year, the independent politician from Vermont put a measure called the “College For All Act” before the Senate, which would have abolished tuition fees at public universities for most families.

The cost of the measure, which the Republicans leading the Senate has shown no interest in, has been estimated at $600 billion, to be financed by a tax on financial transactions.

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Sanders is now among the 23 candidates for the 2020 Democratic presidential nomination, and together with Massachusetts Senator Elizabeth Warren has once again made student loan debt a plank of his campaign.

Warren last month unveiled a detailed proposal to abolish student fees in public universities and cancel student loan debt according to income. The plan, estimated to cost $1.25 billion over a decade, would be financed by a tax on the very wealthy.

State Measures

Though few other detailed plans have emerged, almost all Democratic candidates in 2020 argue for making universities more affordable.

With the election still more than a year off, some states are taking their own steps to reduce the cost of higher education. New York state started offering scholarships last year equalling public university fees to students of modest means, with the caveat that graduates remain in the state for a few years after finishing.

Washington state governor Jay Inslee — another Democratic candidate in the 2020 race — on Tuesday signed into a law a bill raising a key business tax and using the revenue to make attending a public university free starting next year for students from families below the median income level. The bill was supported by two of the state’s largest taxpayers: Microsoft and Amazon.