Crippled by student debt? She has a plan for that.

By: Zachary Barger

In July, Massachusetts Senator and presidential hopeful Elizabeth Warren introduced her much-anticipated bill to wipe out $640 billion of American student loan debt—proving that yes, she does “have a plan for that,” too. Should her campaign promise somehow pass SenatorMitch McConnell’s Senate, nearly 43 million Americans would benefit. 

Student debt has snowballed into a massive crisis for young people in the United States. As of 2018, 44.7 million people—one in four—collectively hold a staggering $1.56 trillion in loan debt, a stark increase from the $675 billion total at this time in 2009. Approximately 40% of those loans went towards financing graduate education. 

By 2012, a typical borrower owed around $57,000 after graduating. On average, these folks today are paying $393 monthly towards their debt. When factoring in sky-rocketing rent costs, car payments and insurance, it comes as no surprise that 10.7% of student loans are in default status.

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Image Source: ElizabethWarren.com 

 

Warren’s bill aims, first and foremost, to fix that. The presidential hopeful’s primary mission would be to forgive up to $50,000 of loan debt for those making less than $100,000 a year. For 75% of borrowers, that would eliminate the entirety of their debt, freeing them from a weight that Warren understands is “holding down an entire generation of Americans.” 

 

For those graduates making more than $100,000 annually (or in a household doing so), Warren has factored in an addendum. Rather than forgiving the full $50,000, her bill offers relief for borrowers earning up to $250,000, covering all but the top 5% of American earners. This portion of her plan would deduct $1 of coverage for every additional three earned. If a borrower’s gross income is $130,000, they receive $40,000 of loan forgiveness. 

 

Seems simple, right? In all truth, it is. 

Student loans have become a necessity for folks seeking to advance their education. As tuition prices increase at eight times that of wages, would-be students are no longer able to work a part-time summer job to cover the cost of school, books and rent. Rent, particularly, is a surging expense: the national median rent for a one-bedroom unit has risen to $959 per month. In metropolitan areas like Washington, it’s more than 150% the national level. Warren has plans for that, too.

These loans are not only hurting borrowers. They have proven debilitating to the economy, too. 

Study after study has found that student debt has a direct negative impact on young people buying homes. Despite an insurgence of first-time buyer assistance programs, home ownership for people age 24-32 nosedived by 8.8% over a ten year period from 2005 to 2014. In a 2012 survey, 40% of responders delayed such purchases due to preexisting debt.

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Image Source: InsideHigherEd.com 

With the addition of student debt, borrowers are less likely to start businesses. Student debt is also partially responsible for the lowest-ever fertility rate in the United States. Coupled with high costs of urban living and global warming-inspired existential dread, we are witnessing young childless people contributing to serious gentrification in American cities. As Atlantic writer Derek Thompson rightly points out, a worker depletion would eliminate the American safety net of “tax-funded welfare and eldercare state to protect individuals from illness, age and bad luck.” 

But how does one pay for such a problem? Naysayers and supporters alike have questioned this for years. Warren’s answer? Undo the Republican tax cuts on the wealthiest Americans and corporations, instilling a 2% “wealth tax” on the 75,000 households earning more than $50 million. According to the Senator, such a tax could bring in $2.75 trillion in revenue over ten years.

In the Democratic Party’s historically crowded presidential primary, Warren is the only one of  the four major candidates to propose a student debt relief plan. Despite affecting 25% of the United States’ population, only Senator Bernie Sanders, Mayor Pete Buttigieg and former HUD chief Julián Castro have put out proposals aimed at curbing student debt.

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Image Source: NPR.org

The most aggressive of these comes from Sanders, who introduced his own debt-wiping plan in June. Under his bill, $1.5 trillion would be spent to clear all federal student debt  no matter a person’s income, with an additional $700 billion allocated to make public college in the United States free. Castro’s plan is less inclusive, focusing only on low-income borrowers, while Buttigieg has proposed cancellation for borrowers who commit to national service.

With current student loan forgiveness programs failing, Americans need better options. Warren’s plan is the most informed, most equitable and proves she truly “has a plan” for building a just future for young people.

 

Featured Image Source: SoFi.com

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