To make college more affordable, Congress should offer incentives to states to increase their spending on public education and require colleges to bear some of the risk when their students default, U.S. Sen. Elizabeth Warren told a gathering of reporters here on Saturday.
In a speech at a conference of the Education Writers Association, Ms. Warren, a Massachusetts Democrat, suggested that Congress provide matching funds to states where policy makers “agree to provide better funding for public colleges” and colleges “agree to better manage costs for their students.”
She also argued for using the federal student-loan programs as leverage, saying “colleges reap all the benefits of student-loan funds, while students and taxpayers bear all of the risk.”
“There are far too few incentives in the federal student-loan programs that encourage colleges to curb their spending or control the debt of their students,” she said. “Give colleges some skin in the game.”
And she called for simplifying federal student aid, saying the existing system discourages students from applying for aid and debt relief.
Ms. Warren also tackled the issue of student debt, suggesting that borrowers be allowed to refinance their loans to take advantage of historically low interest rates. She called for restoring bankruptcy protections to student loans “so that people can get a fresh start” after a job loss, health crisis, or family breakup.
Ms. Warren also argued for stripping the profits from the federal loan system, saying student loans should “cost the students no more than what it costs the government to make those loans.”
During the recent fight over student-loan interest rates, Ms. Warren called for allowing students to borrow at the same rate as banks. That approach did not prevail, but Ms. Warren said she believed it drew attention to the fact that the government makes money on student loans.
“The debate will never be the same again,” she said, in a question-and-answer session following the speech, adding that she was “not giving up” on the idea.
Asked if she thought Congress would allow students to discharge their debt in bankruptcy, Ms. Warren acknowledged that it would be a tough sell, but argued that “there are lots of steps in between” the existing ban and a full repeal.
As for the remainder of her ideas, Ms. Warren seemed optimistic about their chances. She pointed out that naysayers said her idea for the creation of a Consumer Financial Protection Bureau would never make it into law, and now the agency is up and running.
“You get the things you fight for,” she said, “and the things you make a priority.”
