Elizabeth Warren wants to cancel your student loan debt and now she has a legislative proposal.
Here's what you need to know.
Proposal: Cancel Student Loan Debt
U.S. Senator Warren (D-MA), a 2020 presidential candidate, and U.S. Representative James E. Clyburn (D-SC), the House Majority Whip, will introduce in the coming weeks bicameral legislation to cancel student loan debt for 42 million Americans. This legislative proposal closely resembles Warren's campaign proposal from April.
The ambitious student loan forgiveness 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.
“The student debt crisis is real and it’s crushing millions of people -- especially people of color,” Warren said in a statement. “It's time to decide: Are we going to be a country that only helps the rich and powerful get richer and more powerful, or are we going to be a country that invests in its future?”
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. By 2023, 40% of student loan borrowers may default on their student loans.
Specifically, Warren's legislative proposal 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.
Importantly, Warren's plan offers no student loan debt cancellation to borrowers with a household income above $250,000, which she says is the Top 5% of earners. There would also be "phase-outs" based on income. The $50,000 cancellation amount would phase out by $1 for every $3 in income above $100,000. According to Warren, 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."
“For far too many students and families, the cost of higher education has meant daunting debt and a lifetime of student loan repayments,” Clyburn said in a statement. “We need to allow people to get the kind of post-secondary education that will help them achieve their dreams and aspirations, and earn a living to become productive members of society."
How The Warren Proposal Would Be Funded
How would Warren pay for this student loan forgiveness plan and universal free college plan?
Warren's campaign proposal included an Ultra-Millionaire Tax that would include a 2% annual tax on the 75,000 families in the U.S. who have at least $50 million in net worth. However, Warren has not indicated whether the legislative proposal would be funded in the same manner.
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.
