Making College Affordable
We need to make higher education available and affordable to every single American citizen. In fact, it’s what many American colleges and universities used to do. For example, the University of California system offered free tuition at its schools until the 1980s, and in 1965, average tuition at a four-year public university was just $243. Many of the best colleges – including the City University of New York – did not charge any tuition at all.
My college plan will significantly reduce tuition fees at all community colleges, HBCs, public colleges and universities in the United States. Once we realize that higher education is an investment, and not an expense, it makes perfect sense to help everyone get the skills and training they need.
Not only does this help everyone’s careers, but it also boosts the economy as a whole. An educated workforce is a strong workforce, that can be both more productive, and more adaptive to our changing global economy.
Americans already agree that K-12 education shouldn’t cause financial burdens, so why stop at age 18? The psychological community has repeatedly found that it takes longer and longer for children to mature to full adulthood. Our modern world is so large, complicated, and fast-changing, which means education should extend beyond high school.
How We Do It
The cost of winding down tuition fees will be around $60 billion a year. While this may sound like a lot, this figure is not even one-tenth of the annual defense budget. Furthermore, this cost will be offset by imposing a small tax on Wall Street speculators, many of whom nearly destroyed the economy 10 years ago.
Almost all sales that occur in the U.S. are subject to some sort of sales taxes, imposed from state and local governments. This sales tax comes straight out of our wallets and helps fund local governments. But when Wall Street traders buy and sell financial instruments, often multiple times in one day, no sales taxes are applied. This is a massive give-away and subsidy to an industry, which is already too large and profitable.
Since state sales taxes usually range from 4 to 7%, I’m proposing a federal sales tax of 2% on all financial transactions to offset the tuition reform described above. This tax will apply evenly to all sales of equities, securities, futures, derivatives, and other non-consumer financial instruments.
Even more than that, a financial transactions tax of 2% would be an instrumental tool to right-size the financial industry, reduce economic risk, and strengthen our financial system as a whole. Economic research on this tax shows it could raise anywhere from $176 billion to $350 billion per year. In addition to raising significant revenue, this tax would help protect the economy from dangerous “flash crashes” that pose a severe risk to working Americans.
More than 1,000 economists have endorsed this tax, and today some 40 countries throughout the world have imposed a similar tax including Britain, Germany, France, Switzerland, and China. Since American workers had to bail-out Wall Street in 2008, there’s no reason why we can’t use this sales tax to eliminate tuition fees at public colleges and universities.
Student Debt Relief
The Crushing Debt Burden
While tuition-free college going forward is a great idea, what should we do about the student debt that currently exists? In 2017, millions of Americans now owe a combined $1.3 trillion in student loans, many bearing interest rates upwards of 8%. Student loan debt is now the second largest source of debt for Americans- bigger than all the credit cards, car loans, and personal loans combined.
This is an unconscionable and unsustainable burden on America’s youngest generation, especially since these student loans are nearly impossible to discharge in bankruptcy. So while many politicians have introduced proposals for lowering interest rates on these loans, my plan goes one big step further.
21st Century Debt Jubilee
The history of debt jubilees goes all the way back to the first written records of the Sumerian and Assyrian empires. Such periods of debt cancellation were also common traditions for the Ancient Israelites, and the Old Testament is full of references to periods of debt cancellation and land redistribution. The 15th chapter of the book of Deuteronomy is dedicated exclusively to sabbatical and jubilee years. In fact, Jesus Christ, is his first public sermon in the Gospel of Luke, proclaims that he has come to “proclaim release of the captives…and to let the oppressed go free” and “to proclaim the year of the Lord’s favor,” which his Jewish audience would have understood to mean a year of sabbatical or jubilee [Lk 4.18-19].
In 2018, the buildup of debts, especially student loans on young people, has become an unconscionable burden. So in the spirit of our ancient ancestors and Christ himself, we should proclaim a jubilee of student loans and “wipe the slate clean” for America’s youngest generation.
I have spent many years working in and studying economics and the financial services industry. It is with this knowledge that I’ve created the most progressive and economically sound student debt relief plan in the country. I’ve used my expertise and experience to come up with this groundbreaking plan, which would make a tremendous difference in the lives of thousands of people in the 9th district.
Since most of the over $1 trillion in student loans is held by the US Department of Education, I propose that the Department package all of these loans into one large, or several smaller, asset-backed securities (ABS). These securities would be purchased by the Federal Reserve Bank of New York and added to its balance sheet. The Bank would then immediately write-down the value of these securities by 90%. This means that all Americans who have federal student debt would see value of their individual loans reduced by 90%. While they would still need to pay off the remaining 10%, this would be a much smaller burden to them, and to the US economy as a whole. And for purposes of fairness, those who have already paid off all or a portion of their student loans would be eligible for relief of other personal debts, or receive similar compensation.
Since the Federal Reserve is the central bank of the United States, its cost of funds is zero. As the central bank, it has the ability to purchase an infinite amount of securities by simply crediting the deposit accounts of the entities from which it makes the purchases. No other enterprise in the United States has this financial capability. Therefore, the write-down of 90% would still be a profitable investment for the Fed, as it will continually earn interest on the remaining 10% of its student loan portfolio. The negative capitalization that would result from this transaction would be of no consequence to the function of the central bank. This means that around $900 billion of student debt would be removed from the economy with absolutely no cost to anyone.
This is hardly a new or radical idea. This is exactly the same mechanism that was used to alleviate the housing crisis of 2008. When home values were plummeting and millions of homeowners were falling underwater, many millions of mortgages were packaged into securities by Fannie Mae and Freddie Mac, and then purchased and held by the Federal Reserve. This helped to stabilize the housing market and prevent the banks from collapsing. My proposal simply adopts this mechanism for student loans, and ads the write-down provision. Since public student loans are unsecured, uncollateralized and owned entirely by the US government, this write-down would have no effect on any privately held asset values.
The idea of student loan securitization is also not new. Private student loans are frequently securitized into bonds called SLABS, which are sold to investors like any other bond. My debt relief plan simply adopts this same securitization mechanism for public student loans (which constitute the bulk of student loan debt), and then requires the Federal Reserve to be the sole purchaser and holder of the securities.