Elizabeth Warren unveils plan to erase the national student loan debt

It’s bold. It’s sweeping. And it aims to erase almost all student loan debt while making college vastly more affordable. Here’s what you need to know.
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Rick Bowmer/AP Photo

In a bold move earlier today, Sen. Elizabeth Warren (D-MA) laid down her plan in a Medium post to wipe out college student loan debt and make higher education more affordable. She starts her post with a trip down memory lane to when she was a young student pursuing college to become a teacher. She needed a degree then, and you still need a degree now if that’s the profession you choose.

Except today, it’s ever harder. No matter the profession. While more and more students are going to college, it has become more expensive across the board, doubling in cost since the 1980s. Making matters worse is the fact that scholarships and aid haven’t kept up with the rising net costs of college.

It’s important to distinguish between net costs and the sticker price of college. Net cost of college accounts for everything, not just tuition. So think tuition…and also room & board, books & supplies, food, transportation, class and online fees, and any other related expenses.

Adding to the issue is the fact that tuition has increased above the rate of inflation, and in 2016 was increasing above inflation at a rate of six percent. Oh, and let’s not forget that the national student loan debt for Americans is $1.5 trillion. Whether you see the merits of college or not, this is clearly a problem and has been a problem for years now.

Let’s get into the details

So let’s take a look at what Senator Warren’s plan entails, straight from the plan itself:

  • Cancel debt for more than 95% of the nearly 45 million Americans with student loan debt;
  • Wipe out student loan debt entirely for more than 75% of the Americans with that debt;
  • Substantially increase wealth for Black and Latinx families and reduce both the Black-White and Latinx-White wealth gaps; and
  • Provide an enormous middle-class stimulus that will boost economic growth, increase home purchases, and fuel a new wave of small business formation.
  • Give every American the opportunity to attend a two-year or four-year public college without paying a dime in tuition or fees;
  • Make free college truly universal — not just in theory, but in practice — by making higher education of all kinds more inclusive and available to every single American, especially lower-income, Black, and Latinx students, without the need to take on debt to cover costs.
  • It cancels $50,000 in student loan debt for every person with household income under $100,000.
  • It provides substantial debt cancellation for every person with household income between $100,000 and $250,000. The $50,000 cancellation amount phases out by $1 for every $3 in income above $100,000, so, for example, a person with household income of $130,000 gets $40,000 in cancellation, while a person with household income of $160,000 gets $30,000 in cancellation.
  • It offers no debt cancellation to people with household income above $250,000 (the top 5%).
  • For most Americans, cancellation will take place automatically using data already available to the federal government about income and outstanding student loan debt.
  • Private student loan debt is also eligible for cancellation, and the federal government will work with borrowers and the holders of this debt to provide relief.
  • Canceled debt will not be taxed as income.

It’s bold. And if successful, would be incredibly effective. But it’s also extremely expensive. Warren and her team estimate the plan would cost $1.25 trillion over 10 years.

How would she pay for it?

Her proposed tax on the super-wealthy in America, dubbed the Ultra-Millionaire Tax or “wealth tax”. This proposed tax would include about 75,000 of the wealthiest families in the country, and would hit them with an annual 2% tax to any assets above $50 million and another 1% on any assets worth more than $1 billion (so 3% tax overall for a household with a net worth above $1 billion).

She estimates that this tax plan would generate $2.75 trillion in revenue over a 10-year span. So, in terms of paying for her education plan proposed above, the revenue generated from her tax plan would cover it almost twice over.

Class in session

With her plan proposed, plus how she would pay for it, Warren is the first 2020 Democratic presidential candidate to unveil a detailed and robust plan to eradicate the national student loan debt as well as make college more accessible and affordable in the future.

Sure, she caused a ruckus with her “race science” fiasco, and she may not sit atop the heap in our 2020 Democratic presidential candidates rankings, but none of the other candidates have dropped a comprehensive education plan as of yet and being the first to do so will surely give a much-needed boost to her candidacy.

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