What Does Martin O’Malley’s Debt-Free College Proposal Mean for You?

Loans, Student Loans
What Does Martin O'Malley's Debt-Free College Proposal Mean for You?

Martin O’Malley, Democratic candidate for the 2016 presidential nomination, released a proposal July 8 that he says would make it possible for students to graduate debt-free from their state colleges or universities. O’Malley, governor of Maryland from 2007 to 2015 and mayor of Baltimore before that, is one of several candidates making the rising cost of college a focal point of their campaigns.

Read more about what the candidates are saying.

So what exactly does O’Malley plan to do?

His proposal is a broad set of policy recommendations that fall into two categories: reducing the price of public higher education and improving college completion rates.

“It’s an early campaign document, so it’s intended to position him with Democratic primary voters and position him in competition with other Democratic candidates,” says Tom Weko, managing researcher for postsecondary education at the American Institutes for Research in Washington.

O’Malley says he’d make it possible for all students to be able to graduate from their state colleges debt-free starting five years from now. The plan doesn’t include many details, like how it would be funded or when, specifically, each component would be implemented.

And while it addresses some hot-button topics, Weko says O’Malley’s plan doesn’t get at some of the underlying issues: “What I don’t see here is sort of very deep thinking about what can be done to improve efficiency and productivity in higher education.”

The plan

Here’s what O’Malley would do if elected:

  • Freeze tuition at all public colleges and universities
  • Provide matching federal grants to states to increase education funding, in order to reduce how much students would pay out of pocket
  • Develop a plan to reduce tuition to no more than 10% of state median income at all public universities and no more than 5% of state median income at community colleges
  • Give graduates the option to refinance their federal loans at lower interest rates
  • Automatically enroll all graduates in income-based student loan repayment plans, with the choice to opt out
  • Increase the maximum Pell grant for low-income students to cover living expenses
  • Give private student loan borrowers the option to transfer their loans into federal programs to take advantage of federal repayment plans

How it compares to other candidates’ proposals

O’Malley’s proposal is the second major plan released by a presidential candidate with the goal of reducing student debt. In May, Sen. Bernie Sanders of Vermont, O’Malley’s challenger for the Democratic nomination, introduced the College for All Act, legislation that would eliminate tuition and fees at public colleges. Under Sanders’ plan, the federal government would pay for 67% of college costs — as long as states meet certain requirements — and states would cover the remaining amount, removing the need for student tuition spending altogether. Sanders suggested taxing investment banks’ and hedge funds’ stock, bond and derivative trades to pay for it.

Some of O’Malley’s and Sanders’ ideas are similar: They both recommend allowing federal student loan borrowers to refinance their loans at lower rates, a concept introduced by Sen. Elizabeth Warren, D-Mass, in the past two sessions of Congress but not adopted. And they both recommend expanding college students’ access to work-study. But O’Malley’s plan stops short of proposing full tuition remission for all students, as Sanders’ does.

Hillary Clinton has also publicly supported the concept of debt-free college on the campaign trail.

“We have to deal with the indebtedness — to try to move toward making college as debt-free as possible,” she told an Iowa crowd in May. She is expected to release her own higher education proposal in mid-July, according to Politico.

Republican presidential candidates have offered additional ideas for alleviating student loan debt, though none has yet laid out comprehensive proposals. In a speech in Chicago on July 7, Sen. Marco Rubio, R-Fla., proposed instituting income-based repayment for all student loan borrowers — an idea O’Malley and Sanders both support — and allowing private investors to contribute to students’ college costs in return for a portion of their salary after graduation. On the campaign trail in April, Sen. Rand Paul, R-Ky., said college tuition should be tax deductible.

The background

This wouldn’t be the first time in his career O’Malley has made it a priority to reduce college costs. As governor, O’Malley froze tuition for the University of Maryland system from 2007 to 2010 and increased state higher education funding 34% between 2008 and 2015. In May, however, the university system approved a tuition hike of at least 5% starting this fall, citing a state budget shortfall. That shows a tuition freeze isn’t always the most effective way to control costs, Weko says.

“You can kind of put your foot on the neck of the university system for a few consecutive years,” he says. “At some point that dam is going to burst, and the longer-term problem — and the more fundamental problem — is how to do good work and how to do it more effectively.”

Brianna McGurran is a staff writer at NerdWallet, a personal finance website. Email: bmcgurran@nerdwallet.com. Twitter: @briannamcscribe.

 

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