WASHINGTON — Almost six years ago, Elizabeth Warren introduced her first standalone bill as a U.S. senator. The premise was both clever and simple: students could borrow money for their educations at the same interest rate that banks received from the Federal Reserve. At the time, the rate for a federal Stafford loan was about to double to 6.8 percent. The Fed’s rate for banks was a paltry 0.75 percent. “This isn’t right,” she said back then. “Our students are facing a crisis. We cannot stand by and simply watch.”
On Monday morning, Warren, now a presidential candidate, unveiled a sweeping new plan to address the twin crises of student debt and college affordability that continue to worsen year after year.
Warren’s 2020 higher education plan — which the campaign shared with Rolling Stone ahead of Monday’s unveiling — calls for the immediate cancellation of up to $50,000 in debt for the vast majority of the 45 million Americans who cumulatively owe $1.5 trillion (and counting) in student loans. Her proposal would also eliminate tuition and fees for undergrads at every public two- and four-year college in America, as well as invest tens of billions of dollars more into Pell grants and into funding for Historically Black Colleges and Universities. What’s more, Warren’s proposal would make student loans dischargeable in bankruptcy, and federal money for for-profit colleges would be gradually phased out.
Combining debt relief and affordability reforms, the total cost of her plan, Warren says, would be $1.25 trillion over a decade. The funding would come from her proposed Ultra-Millionaire Tax, a 2 percent annual levy on families with $50 million dollars or more in wealth and an additional 1 percent tax on wealth above $1 billion.
In a Medium post outlining her new higher-ed plan, Warren acknowledges the “crushing” effect of student debt on individual borrowers and their families. But she frames skyrocketing student debt as a societal problem “acting as an anchor on our economy,” a slow-motion financial crisis that is exacerbating income inequality while stunting homeownership rates, the creation of small businesses and college completion. “It’s a problem for all of us,” she writes.
Warren’s plan is by far the most ambitious and detailed of the 2020 Democratic hopefuls so far. Several other Democratic candidates — who also happen to be Warren’s colleagues in Congress — have either spoken out favorably for debt-free or tuition-free college or cosponsored a debt-free-college bill first introduced by Sen. Brian Schatz (D-HI). A long-shot entrant into the race, Wayne Messam, the mayor of Miramar, Florida, has called for cancelling all federally-held student loans regardless of income.
Warren has made higher education a staple of her time in the Senate, constantly firing off letters to federal agencies demanding that they hold for-profit colleges and student-loan servicers accountable. She announces her student-debt plan on the same day that she’s scheduled to appear at a CNN town hall focused on young-adult issues organized by the Institute of Politics at the Harvard Kennedy School and the New Hampshire Institute of Politics. Other 2020 contenders listed to speak at the youth-focused town hall are Sens. Amy Klobuchar (D-MN), Kamala Harris (D-CA) and Bernie Sanders (I-VT) as well as South Bend Mayor Pete Buttigieg.
Warren’s student debt cancellation plan would give the most relief to borrowers with lower incomes. Those with a household income under $100,000 would automatically get $50,000 in debt wiped out. For those with a household income between $100,000 and $250,000, that $50,000 cancellation figure decreases by $1 for every $3 in income above $100,000. A person with a household income of $160,000, for instance, would qualify for $30,000 in cancellation. (Borrowers with household income above $250,000 would not get any debt cancellation.) And for borrowers who still had debt after her plan went into effect, they would be able to refinance their remaining loans at lower interest rates.
Warren’s plan reflects the reality that the student-debt crisis isn’t limited to borrowers who don’t finish college or work in service-industry or low-paying fields. A household of two teachers that earns $140,000 a year but has $100,000 in debt from graduate school would get relief; so, too, would a primary-care physician making $190,000 a year with $250,000 in debt from undergrad and medical school.
Her proposal, Warren says, would also strengthen the Public Service Loan Forgiveness program, which allows borrowers who work in the public sector for a decade to have their remaining loan balance forgiven.
According to an analysis of Warren’s proposal by professors and researchers at Arizona State University, Brandeis University and the University of Tennessee, Knoxville, up to 76 percent of households with student debt would get “total loan forgiveness.” That analysis — provided to Rolling Stone by Warren’s campaign — concluded that 95 percent of households that currently have student loan debt would get some relief under Warren’s plan.
Warren’s plan, according to that same analysis, would result in more debt relief for black and Latino households and for lower- and middle-income borrowers. It would also chip away at the stark racial wealth gap experienced by black and Latino households compared to white ones, with black households that had borrowed money for college seeing a projected $15,700 in gains and Latino borrowing households seeing $27,000 in gains. It would also likely disproportionately benefit female borrowers: a 2018 analysis by the American Association of University Women found that women held two-thirds of all outstanding student-loan debt in America.
No blueprint for solving the student debt crisis is serious, however, without tackling the rising cost of college. On that front, Warren’s plan calls for “truly universal” free college — namely, public two- and four-year colleges and universities where tuition and fees cost nothing thanks to a “historic new federal investment” in public higher ed as well as partnerships between state governments and Washington to split those tuition and fees costs. “Like K-12 education,” she writes, “college is a basic need that should be available for free to everyone who wants to go.”
Warren calls for an additional $100 billion injection over 10 years into the federal Pell grant program for lower- and middle-income students to pay for non-tuition expenses. She would also launch a $50 billion fund for Historically Black Colleges and Universities and other Minority-Serving Institutions, phase out federal taxpayer dollars going to for-profit colleges, ban public universities from considering citizenship status and criminal history, and force public colleges to submit to an annual “equity audit” focusing on enrollment and completion rates for lower-income and minority students.