Elizabeth Warren wants to cancel your student loan debt on her first day as president – without Congress.
Here’s what you need to know.
Proposal: Cancel Student Loan Debt As President
U.S. Senator Warren (D-MA), a 2020 presidential candidate, wants to 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.
Now, she says she would institute student loan forgiveness without Congress.
“I will start to use existing laws on day one of my presidency to implement my student loan debt cancellation plan that offers relief to 42 million Americans — in addition to using all available tools to address racial disparities in higher education, crack down on for-profit institutions, and eliminate predatory lending,” Warren said.
According to the latest student loan debt statistics, there are more than 44 million Americans who collectively owe $1.6 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.
Warren said that the U.S. Department of Education has the authority to cancel student loan debt and she would instruct the Secretary of Education to begin student loan forgiveness on day one of a Warren administration, if Warren is elected president in November 2020.
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.”
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.