The funding of higher education is a current issue globally, and has been a key part of Democratic nominee Hillary Clinton’s campaign in the run-up to the November United States presidential election.
The US has one of the most expensive higher education systems in the world. According to PwC, the state contributes 34% to the cost of higher education. (South Africa contributes 39%.)
“State-funding for public universities decreased significantly over the last decade, which resulted in an increased reliance on tuition fees as a source of revenue,” PwC’s higher education leader, Ernest Carelse, wrote in a note. “This also resulted in student debt in the US exceeding $1-trillion for the first time, in 2014, which is bigger than the nation’s credit card debt of $0.7-trillion.”
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The US department of education says it awards about $150-billion a year in grants, work-study funds (which allows a student to pay off debts by working while studying) and low-interest loans to more than 15-million students.
Federal student aid covers expenses such as tuition and fees, accommodation and food, study supplies and transport. The interest rates vary depending on the loan type and currently ranges from 3.76% to 6.31%. US treasury financials show that, in the first quarter of 2016, student loans accounted for 45.7% of total US federal government assets.
According to Clinton’s campaign website, every student should have the option to graduate from a public college or university in their state without taking on any student debt. Her proposal is to spend $500-billion on this over 10 years, and will be fully funded by limiting tax breaks for the wealthy.
Clinton says all community colleges will offer free tuition. Students will also pay no tuition at in-state four-year public colleges and universities. At first, this will apply to students from families earning $85 000 or less a year. By 2021, it will apply to families with an income of up to $125 000 a year.
Borrowers will be able to refinance loans at current rates and will never have to pay more than 10% of their income. All remaining college debt will be forgiven after 20 years.
Clinton also promises to cut interest rates so that the government will never profit from student loans.