2020 Presidential candidate U.S. Senator Elizabeth Warren introduced legislation Tuesday that would eliminate $640 billion in student loan debt offering relief to 45 million Americans.
The bill, titled, “The Student Loan Debt Relief Act” is aimed to support low and middle-income households at the expense of the rich and would cancel up to $50,000 in outstanding student loan debt for borrowers who earn less than $100,000 a year. The amount of relief one could receive would proportionally decline by $1 for every $3 one makes after $100,000 up to $250,000. Those earning more than $250,000 a year would qualify for no benefits from the bill.
A companion bill was introduced in the U.S. House of Representatives with U.S. Rep. James Clyburn (D-S.C.), the third highest ranking Democrat in the lower chamber.
“Student loan debt in this nation has reached crisis proportions,” Warren said in a press conference announcing the legislation with Clyburn.
Warren previously unveiled her plan to deal with the nation’s student debt crisis in April, but her legislation proposed this week offers new details into the senator’s intentions on how she plans to tackle the problem with mounting student debt expected to rise to $2 trillion by the year 2022.
The loan cancellations for borrowers would take approximately a year to complete and benefits would be based on a household’s income from the most recent tax year.
Borrowers would not need to file any additional paperwork with the government, as cancellations would be implemented automatically the Treasury Department, the Internal Revenue Service and the Department of Education. Parent-Plus loans would also be subject to cancelation under the bill.
Warren’s proposal also allows those with private loans to convert them into federal loans for forgiveness, and any relief offered by the government would not be taxable.
According to Warren, the plan would be paid for with an additional tax on wealthy earners. The Massachusetts senator has called for an additional 2 percent annual tax on families that possess more than $50 million in wealth and a new 1 percent tax on those whose wealth exceeds $1 billion.
Warren’s plan on student debt is similar to rival 2020 White House hopeful U.S. Sen. Bernie Sanders’ (I-Vt.), whose plan announced in June calls for the government to cancel all $1.6 trillion in outstanding student loans paid for by a new tax targeting financial institutions on Wall Street.
Mary Clare Amselem is an education policy expert at the Heritage Foundation. Amselem said Warren and Sanders are focusing on the wrong end of the problem, noting that the federal government has played a significant role in driving up tuition costs through its student lending.
“The focus should be on driving down tuition prices,” Amselem told The Federalist, noting that private-market reforms could be the solution to bringing down the cost of college and make universities more competitive.
Amselem also stressed that it’s important to provide alternatives for those whose careers do not warrant going to college or whose financial situation keeps them from pursuing a four-year degree.
Carrie Lukas, the president of the Independent Women’s Forum issued a similar sentiment, arguing that policies to simply forgive student debt would incentivize colleges to continue driving up costs.
“They would take this policy as another excuse to jack up tuition and waste more resources on Olympic size pools, fancy lecture halls, and six-figure administrative positions, knowing those bills would just end up foisted on taxpayers,” Lukas told The Federalist.
Warren and Sanders are neck-and-neck in the latest polls for the 2020 Democratic presidential nomination. Each candidate has an average of 15 percent support among Democratic voters in Real Clear Politics’ latest aggregate of polls, leading the 25-candidate pack trailing only behind the race’s front-runner former Vice President Joe Biden.
Warren and Sanders will share the same debate stage on the first night of debates next week in Detroit moderated by CNN.