Elizabeth Warren, the US senator from Massachusetts and one of the most prominent Democrats running for president in 2020, wants to cancel student debt and make college education in the US free. Warren unveiled the ambitious proposal on Monday but what exactly is it about? Well, first of all, let’s look at the basics. If indeed the proposal is implemented, it will mean that all student loans will be forgiven. This could benefit millions of Americans.
Warren says that the plan could help reduce the wealth gap in the US and provide a much needed economic stimulus to the middle class. She thinks that the plan may also help free up more income for middle class households which may lead to increased home purchases and even investments into small businesses. Recent student loan statistics show that more than 44 million Americans collectively owe around $1.5 trillion in student loans. Student loan is now ranked as the highest consumer debt in terms of value, second only to mortgages.
But the chances of these people paying up their loans are becoming slimmer by the day. It’s estimated that at least 40% of all Americans who owe student loans may actually default by 2023. This is clearly a burden and Warren is hoping that her plan will help solve the issue. According to the proposal, over $50,000 in student loans will be canceled for households that have an average annual income of $100,000. In addition to this, households with an average annual income of between $100,000 and $250,000 will also get “substantial debt cancellation.” The plan will also not charge any taxes on the student loans canceled.
It’s important to note that Warren’s plan has conveniently overlooked households with an annual average income of above $250,000. She believes that individual households with this kind of income are ranked among the top 5% earners in the country and as such, they are more than capable of fulfilling their debt obligations. In addition to this, the senator from Massachusetts is proposing free college for all.
The plan will literally give every American the chance to attend between two to four years of college without paying a single cent. According to the plan, both the federal and state governments will split the cost of funding the proposal. Warren noted in a tweet sent later after the plan was launched that current student loans and the overall cost of college are becoming huge burdens for many American households. She argues that her plan presents a significant “structural transformation” that will ensure all “kids in the United States have access to opportunities.”
Funding this proposal will be the biggest issue. Warren, just like many Democrats, is proposing an ultra-millionaire tax program. The plan would essentially charge 2% in annual taxes on all the 75,000 US families with a net worth of above $50 million. Whether this will be enough to fully support the program is still unknown. Despite this, such a proposal will have a very hard time passing the GOP-dominated Senate.