U.S. Senator Elizabeth Warren wants to cancel your student loan debt.
Here are five questions.
Student Loan Forgiveness: Elizabeth Warren Proposal
This week, Warren (D-MA) and a 2020 presidential candidate, proposed a bold plan to cancel student loan debt for tens of millions of Americans. The plan would cancel student loan debt for more than 95% of borrowers, and would entirely cancel student loan debt for more than 75% of Americans with student loan debt. Warren believes that her plan would reduce the wealth gap in America and provide an economic stimulus to the middle class to increase home purchases and help start small businesses.
Specifically, Warren’s plan for student loan debt forgiveness would:
- Cancel $50,000 in student loan debt for every person with household income under $100,000.
- Provide substantial debt cancellation for every person with household income between $100,000 and $250,000.
- Not tax as income student loan debt that has been cancelled.
- Also make private student loan debt eligible for cancellation.
- Streamline the student loan debt forgiveness process using data and income information already available to the federal government.
5 Questions: Elizabeth Warren Plan For Student Loan Forgiveness
Warren has been proactively releasing new policy proposals to help solve several high-profile issues, with student loan debt among them. As policymakers, legislators, candidates and the general public assess the merits of this latest student loan forgiveness proposal, here are several questions to consider.
1. How would this student loan forgiveness proposal be funded?
According to the latest student loan debt statistics, there are more than 44 million Americans who collectively owe $1.5 trillion in student loan debt. Today, according to personal finance site Make Lemonade, student loan debt is now the second highest consumer debt category – second only to mortgages and higher than credit card debt and auto loans.
So, how would Warren pay for all this student loan forgiveness?
Warren has proposed an Ultra-Millionaire Tax, which would levy a 2% annual tax on the 75,000 families in the U.S. who have at least $50 million in wealth. Warren also wants to invest an additional $100 billion in Pell Grants over the next 10 years and expand eligibility for Pell Grants to include more lower- and middle-income students.
2. How would an “Ultra-Millionaire Tax” be implemented?
In her proposal, Warren supports “a 2% annual tax on the 75,000 families with $50 million or more in wealth.”
Would the tax apply to annual income? If not, does the term “wealth” refer to “net worth,” which is equal to assets minus liabilities? If the intention is net worth, how would the federal government assess the net worth of families who would owe such a tax, and continue to monitor annually the net worth of these families?
3. What about borrowers who have already repaid their student loans?
If Warren’s proposal became law, what retroactivity, if any, would apply? There are many people who have already repaid their student loans. Would any of these borrowers receive any retroactive student loan forgiveness?
4. Student loan debt is a major issue, but what about other forms of consumer debt?
Mortgage debt, credit card debt and auto loan debt are three other major forms of consumer debt in the U.S.
Americans owe more than $1 trillion – yes, $1 trillion – each of mortgage, credit card and auto debt. Student loan debt is a major issue in the U.S., and so are these other types of consumer debt. Can these borrowers expect any form of debt relief?
5. Should taxpayers pay the cost of student loan forgiveness?
For anyone who currently has student loan debt, the idea of this student loan forgiveness plan may sound like winning the lottery.
For others, large-scale student loan forgiveness may sound unfair because federal taxpayers essentially are financially responsible to repay other people’s student loans.
What do you think?
Student Loans: 2020 Presidential Candidates
Some of the 2020 presidential candidates have weighed in on the future of higher education, how to manage growing student loan debt, and how to pay off student loans faster. Candidates including President Donald Trump, U.S. Senator Bernie Sanders (I-VT), Mayor Pete Buttigieg (D-IN), U.S. Senator Kamala Harris (D-CA), U.S. Senator Kirsten Gillibrand (D-NY) and others have proposed everything from tuition-free college to student loan debt forgiveness to student loan refinancing and public service loan forgiveness.