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Clinton to propose 3-month hiatus for repayment of student loans

Presumptive Democratic presidential nominee Hillary Clinton and President Obama get barbecue at Midwood Smokehouse after a rally in Charlotte, N.C., on Tuesday, July 5, 2016. (Photo by Melina Mara/The Washington Post)

Hillary Clinton plans to promise a three-month moratorium on repayment of federal student loans to allow time to refinance or restructure high-interest debt, part of a larger package of education-related proposals intended to appeal to young voters.

Clinton  will propose the hiatus on loan repayment Wednesday, according to preview material obtained by The Washington Post. She plans to campaign in Atlantic City, N.J., to draw attention to her campaign's claims that Republican opponent Donald Trump has  cheated workers on his way to business success.

Clinton is framing her general election case against Trump as  a choice between someone who tries to address problems such as student debt and someone she accuses of selfish motives. On Tuesday, Clinton promised to work hard for voters as she campaigned alongside President Obama. Neither Democrat directly addressed news that the FBI would not recommend criminal prosecution over security lapses involving Clinton's private email system while she was secretary of state.

The Clinton campaign declined comment on her plans. Clinton addressed the problem of high student debt during remarks to a convention of the nation's largest teachers' union on Tuesday. Clinton said that she would allow teachers and other graduates who enter public service fields to refinance their student loans.

"I want everyone to be able to refinance your student loans so you never have to pay more than you can afford and for people who go into public service, and I include teaching because it is the first and primary public service," Clinton said at the National Education Association meeting in Washington. "Any remaining debt after you refinance will be forgiven after 10 years."

Student borrowers could defer loan payments for three months under a reprieve she is promising to impose through the unilateral power of the presidency if she wins the election and becomes president next year. The proposal is expected to cost the federal government more than $1 billion, not because of the short hiatus but because of the lost interest when borrowers refinance to cheaper loans. Some of the cost could be defrayed by greater economic participation by borrowers, such as starting businesses or buying homes.

Clinton has frequently  told audiences she wants to find other ways to help student borrowers refinance loans with interest rates that are often far higher than home mortgages or car loans.

In addition to the plan she will announce on Wednesday, Clinton's debt reduction proposals include limiting student loan payments to a proportion of the borrowers debt.

During the hiatus, borrowers would receive help and advice to save money, the preview material provided to education advocates said. Clinton frequently talks of the advantages of loan repayment plans that are tied to income, which would be one of the refinancing options along with help reducing fees and resolving delinquent debts.

Clinton also plans to use the moratorium to crack down on for-profit colleges and loan servicers, whom she accuses of often taking advantage of borrowers.

The high cost of college and the difficulty financing student debt became prominent issues during Clinton's long primary campaign against Sen. Bernie Sanders. Her plan would allow what she calls debt-free public college and cheaper means to borrow money for private education.

In the Democratic primary, Sanders's policy proposal to make public colleges and universities free was  a driving force of support for the senator from Vermont, especially among young voters.

For college students and recent graduates saddled with debt, the proposal represented a radical change of the existing system that appealed to them.

But Clinton objected that the plan would be impossible to execute and could even hurt some college students, including ones that attended historically black colleges and universities.

She exhorted younger voters to look more closely at the details of Sanders's plans and promised that she would focus on reducing student debt, not promising things she couldn't deliver.

"When somebody tells you something is free, ask for the fine print," Clinton said earlier this year. "We’re going to help you pay down and get rid of your student debt."

But still, the gap persisted. Young voters overwhelmingly backed Sanders over Clinton in primary after primary, a problem that potentially spells trouble for her ability to keep the Democratic coalition that elected Obama twice intact heading into November.

In a poll of 18- to 29-year-olds by Harvard's Institute of Politics this year, 54 percent of young voters viewed Sanders favorably compared to 37 percent who viewed Clinton favorably.