On Monday, Sen. Elizabeth Warren (D-Mass.) released a wide-ranging plan to fix the U.S. college system, with proposals including making two-year and four-year public college free and expanding the size and scope of the federal Pell Grant program.
And one particularly radical idea is sure to grab the attention of young people around the country: wiping out student loan debt for the vast majority of American borrowers.
“The time for half-measures is over,” Warren, one of many politicians and public figures hoping to secure the 2020 Democratic presidential nomination, wrote in a post published Monday on Medium. “My broad cancellation plan is a real solution to our student debt crisis. It helps millions of families and removes a weight that’s holding back our economy.”
Last year, outstanding student debt in the U.S. topped $1.5 trillion, a growing financial burden that Warren argues is “crushing millions of families and acting as an anchor on our economy.”
“It’s reducing home ownership rates,” she wrote. “It’s leading fewer people to start businesses. It’s forcing students to drop out of school before getting a degree. It’s a problem for all of us.”
To address the problem, Warren is suggesting what she calls a “truly transformational” approach: wiping out $50,000 in student loan debt for anyone with a household income below $100,000. People with student loans and a household income between $100,000 and $250,000 would receive substantial relief as well. At that point, “the $50,000 cancellation amount phases out by $1 for every $3 in income above $100,000,” Warren wrote.
That means someone with a household income of $130,000 would get $40,000 of their loans wiped out. Someone with a household income of $160,000 would get $30,000 in relief.
People with household incomes above $250,000 would not be eligible for debt cancellation.
Under Warren’s proposed plan, up to 76 percent of households with student loan debt would receive “total loan forgiveness,” according to an economic analysis of the proposal by academics at Arizona State University, Brandeis University and the University of Tennessee, Knoxville. Ninety-five percent, or 42 million Americans, would be eligible to have at least some of their debt canceled.
The plan would particularly benefit black, Latino and lower-income households, as well as households headed by people who never finished college, the researchers said. Wiping out the debt would cost the government an estimated $640 billion, they noted.
To make the process as painless as possible, student debt owned by the government would be canceled automatically after an analysis of borrowers’ income and outstanding debt, Warren said. Private student loan debt would be “eligible for cancellation” as well, but in those cases, “the federal government will work with borrowers and the holders of this debt to provide relief,” she said.
Randi Weingarten, the president of the influential American Federation of Teachers union, said in a prepared statement that Warren’s college proposals would be a “game-changer” for borrowers, and would prove to be “as consequential as the GI Bill” enacted after World War II.
“Sen. Warren’s plan would release Americans from their debt sentence so they can live their lives, care for their families and have a fair shot at the American dream,” Weingarten said.
Warren’s proposal also received praise from Seth Frotman, the former student loan ombudsman at the Consumer Financial Protection Bureau who stepped down last year in protest of what he saw as the Trump administration’s prioritization of “powerful financial companies” over borrowers.
“Student debt has become a crisis that can no longer be ignored,” Frotman said. “We need leaders who not only understand this crisis, but who put forth solutions to end it. Senator Warren’s proposal recognizes the scale of this crisis and rises to meet it.”
In her post, Warren lays out a litany of other college-related proposals as well. Like fellow Democratic presidential candidate Sen. Bernie Sanders (I-Vt.), Warren wants to make two-year and four-year public colleges free by wiping out tuition and fees. She also wants to do more to help students pay for the growing cost of non-tuition expenses like room and board by investing an additional $100 billion in the Pell Grants program over the next decade, as well as expanding their size and who is eligible for them.
On top of that, Warren hopes to create a fund with a minimum of $50 billion to help historically black colleges and universities and minority-serving institutions; prohibit “public colleges from considering citizenship status or criminal history in admissions decisions”; give additional funds to states that substantially improve enrollment and graduation rates for lower-income students and students of color; and eventually cut for-profit colleges off from federal money.
“I commend Senator Warren for proposing solutions to rectify our student debt crisis and to provide universal race conscious access to a quality college degree,” said Darrick Hamilton, executive director of the Kirwan Institute for the Study of Race and Ethnicity at Ohio State University. “This bold debt cancellation proposal, coupled with investments to let Americans graduate college without debt, offers an American promise of enabling access to a college education regardless of one’s race or families’ ability to pay.”
The plan to broadly cancel student debt and institute a universal free college program is estimated to cost a total of $1.25 trillion over 10 years. Warren claims the cost would be covered by passing a separate plan to annually tax the wealth of households worth more than $50 million.
The academics who analyzed the report argued that the overall cost would likely be offset by additional tax revenue that would come from the proposal itself, which they said would serve as a middle-class economic stimulus.
“Debt cancellation cascades to relieving thousands of dollars in interest payments while leaving several hundred dollars each month for consumption and investment,” the researchers wrote in a letter to Warren. “It would likely entail consumer-driven economic stimulus, improved credit scores, greater home-buying rates and housing stability, higher college completion rates, and greater business formation.”
Thus far in 2019, Warren has distinguished herself from other Democratic presidential candidates by regularly putting out innovative policy proposals, like her plans for universal child care and an annual wealth tax on the ultra-wealthy. On Friday, Warren made news on the non-policy front when she became the first Democratic presidential candidate to call for President Donald Trump’s impeachment.
But the Massachusetts senator has also faced questions about the large size of her staff after only raising $6 million during the first quarter of the year ― a number that can be at least partially attributed to her decision to forego traditional big-donor fundraising tactics.
In her post on Monday, Warren argued that she began “sounding the alarm” on the student debt crisis long ago, noting that as a senator she has introduced bills to “provide relief to student borrowers” and “let people refinance their loans and lower their monthly payments.” She has also pressured the Department of Education to cancel thousands of “fraudulent” loans related to the now-dissolved for-profit Corinthian Colleges.
“We got into this crisis because state governments and the federal government decided that instead of treating higher education like our public school system ― free and accessible to all Americans ― they’d rather cut taxes for billionaires and giant corporations and offload the cost of higher education onto students and their families,” she wrote Monday.
“The student debt crisis is the direct result of this failed experiment,” she added. “It’s time to end that experiment, to clean up the mess it’s caused, and to do better.”