Elizabeth Warren wants to wipe away $ 640 billion in student debt with a tax on the rich

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This idea went mainstream on Monday.

As part of her campaign for the Democratic nomination for president, Massachusetts Senator Elizabeth Warren published a proposal that would provide significant student loan relief for a large portion of borrowers.

The entire proposal would cost $ 1.25 trillion over 10 years, Warren’s camp estimates, and Warren suggests paying it through a tax on the super-rich.

Under her plan, borrowers with household incomes less than $ 100,000 would cancel their student debt of $ 50,000. Borrowers with incomes between $ 150,000 and $ 250,000 are eligible for debt relief, but not the full $ 50,000, and borrowers earning $ 250,000 or more would not be granted any debt relief.

In addition to debt relief, Warren suggested making public college tuition free and adding $ 100 billion to the Pell Scholarship program, which provides low-income students with college money over the next 10 years.

All told, the plan would cancel an estimated $ 640 billion in debt. The entire proposal would cost $ 1.25 trillion over 10 years, Warren’s camp estimates, and Warren suggests paying it through a tax on the super-rich.

Warren’s proposal to address student debt and college affordability is the most dramatic to emerge in the presidential contest. Most of their opponents have advocated some kind of tuition-free college, but none have discussed large-scale debt relief.

‘To have a sustainable, tasty policy for everyone [the plan says] We need to involve as many people as possible ‘


– —Mark Huelsman, Associate Director of Policy and Research, Demos

It is arguably also the first attempt by a great politician to walk the political tightrope between offering a student loan and offering college affordability that is clear and universal enough to find broad support, but also focused enough to appeal to those struggling hardest to provide the greatest relief from the weight of their debts.

“To have a sustainable and tasty policy for everyone [the plan says] We need to involve as many people as possible, ”said Mark Huelsman, deputy director of policy and research at Demos, a left-wing think tank that has also made proposals on the affordability of universities that have influenced democratic presidential policy.

At the same time, Warren’s plan “also ensures that those who are most likely to struggle with debt are out of debt or never have to borrow college again,” Huelsman said.

Who Would Benefit from Warren’s Advantage?

In recent years, critics have scoffed at proposals to cancel or make student debt less burdensome, fearing that the benefits would largely flow to those in the most debts. That often means borrowers with the highest incomes: think of health professionals or others with six-figure debts, but also high six-figure salaries. By tying debt relief to income, Warren’s plan could address some of these concerns.

By freeing up tuition while also expanding the Pell Scholarship, Warren’s plan would ease the burden on middle and upper-middle class families struggling to pay tuition.

An analysis by professors at Brandeis University, Arizona State University, and the University of Tennessee, and disseminated through Warren’s campaign, found that 90% of households headed by someone who went to college but didn’t graduate were under their plan would receive a complete cancellation of the student loan. Only 28% of households headed by a person with a PhD or professional qualification would get a full layoff under the plan.

Black and Latin American borrowers would also benefit more from Warren’s proposal. Research has shown that student debt exacerbates the racial wealth gap.

See also: Where the 2020 candidates stand in terms of college debt and college affordability

Warren’s plan takes a similarly broad but focused approach to college affordability. One of the main complaints against fee-free college proposals is that it is a giveaway for middle and upper-middle class families while failing to meet the needs of low-income students. These students’ tuition fees are likely to be covered by a Pell Scholarship and other sources of funding, but they are struggling to afford the cost of living.

By freeing up tuition while also expanding the Pell Scholarship, Warren’s plan would ease the burden on middle and upper-middle class families struggling to pay tuition while also covering other expenses for low-income students. “Not everyone gets the same flat-rate benefit, but it’s the same guarantee,” said Huelsman.

“The student debt crisis is the direct result of this failed experiment”

Warren formulated her proposal as a necessary antidote to policies by both federal and state governments that have shifted college costs from these facilities to students and families over the past few decades.

In a post on Medium, Warren highlighted how a system where the government paid much of the bill for higher education allowed her to go to college and eventually law school despite her family’s shaky finances.

“Today it is virtually impossible for a young person to find such an opportunity,” Warren wrote in the Post, as state and federal governments do not invest in higher education.

Elizabeth Warren’s proposal includes elements that reflect her history as one of the fiercest critics of the student credit and for-profit higher education industries.

“The student debt crisis is the direct result of this failed experiment,” Warren added in the post. “It’s time to stop this experiment, clean up the mess it made, and do better – better for people wanting to go to (or return to) college, better for current students, better for graduates, better for their families. and better for our entire economy. “

In addition to the more headline-grabbing provisions, Warren’s proposal also includes elements that reflect her history as one of the fiercest critics of the student credit and for-profit college industry. For example, she suggests penalizing student loan companies and executives for breaking the law and cutting off for-profit colleges from government grants.

A bold proposal that is far from becoming a reality

While Warren’s proposal could postpone conversation about student loan affordability and college affordability in the Democratic primary, it is unlikely to become a reality in its current form even if she is elected president.

Warren would need Congressional help, and many elements of the plan are likely to fuel the wrath of Republicans in Congress and lobbying organizations at private nonprofit and for-profit universities, said Robert Kelchen, a professor of college funding at Seton Hall University.

First, Warren suggests ending federal funding for for-profit colleges. Legislature has had a heated debate in recent years about how for-profit colleges can be held accountable if they have been accused of luring students with misleading promises only to put them with high student loan debt and little.

In addition, there have already been some rejections from the lobby of private non-profit universities on proposals that would make public universities more cost-effective. Many private universities are already struggling to attract students and maintain their finances. A plan to bring public universities closer to freedom “could result in a number of private universities being closed, and these are usually politically popular institutions,” Kelchen said.

Additionally, Republicans in Congress may also be concerned about the boost the plan is giving college graduates who may be deterred by their debts from buying a home or car but who will ultimately pay it off and fix it, Kelchen said. Borrowers who have worked to pay off their loans faster are not benefiting and arguably taking some of the “skin in the game” as motivation for students to quit college, Kelchen said.

Finally, there’s the estimated $ 1.25 trillion price tag, which Warren says will be covered by a tax on the super-rich. If you want to criticize the plan, you could call it a tax increase, said Kelchen.

But of course, these critics are probably not Warren’s target audience. The plan is “definitely aimed at younger adults who are currently the driving force behind the Democrats,” Kelchen said.

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