debt-cancellation plan
Under Warren's new debt-cancellation plan, self-sufficiency doesn't seem like such a far off reality anymore. (Illustration by James O'Toole, Grand Valley State University))
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debt-cancellation plan

Debt-cancellation plan: the three words that every college student wants to hear.

Almost every college student gets the same feeling inside when thinking about their already accrued or future student debt: cue falling stomach, tightening throat and gnawing insides. Democratic presidential hopeful Elizabeth Warren, however, has introduced a debt-cancellation plan that would provide broad debt relief to student borrowers, bringing hope to those struggling under the weight of accumulating debt. No matter the side of the aisle, every student should learn how the plan could affect them.

Warren’s campaign announced the plan in an article published April 22 on Medium. The gist of the debt-cancellation plan is that up to $50,000 in student loan debt will be forgiven for individuals whose household income is less than $100,000, and the amount of available aid lowers as household income rises to $250,000, at which point the individual is ineligible.

Specifically, every $3 above the $100,000 income cap reduces the amount of debt forgiveness by $1. This means that a person making $98,000 a year can have the full $50,000 in debt-forgiveness, while a person making $115,000 a year will have $45,000 available to them.

The eligibility for debt-canceling aid stops at $250,000 a year, because households with that yearly income become the top 5 percent in regard to income and wealth in America. Despite the two-pronged yearly income cap, the plan would eliminate the debt of over 75 percent of student borrowers and provide some relief to around 95 percent.

Warren’s campaign also includes a debt calculator so curious college students and future voters can plug in their own numbers to see how much debt forgiveness they’re eligible for.

The plan also specifies that the debt-cancellation would take place automatically using information available to the federal government in the course of filling out the FAFSA, taking out federal loans and filing taxes. Additionally, private loan debt would also be eligible for debt forgiveness. The cancelled debt would not be taxed as income.

The impact of this kind of broad debt-cancellation could have extraordinary effects on the economy. It seems every other week there’s another headline about millennials damaging the housing market, some other industry or having too few children. In many cases, this is the result of crippling student loan debt. When individuals spend years paying off debts that only seem to grow, it’s nearly impossible to think on the future.

Houses for growing families aren’t realistic for individuals paying off tens of thousands of dollars or more in student loan debt. An actual family — more mouths to feed and college educations to pay for — is a distant dream to younger generations.

Beyond the inability to plan for the future and for the futures of unborn children, student loan debt stifles young entrepreneurs’ options for starting businesses, creating jobs and stimulating local economies. The plan references a study that found that leniency on student debt increased the development of small businesses.

The student debt crisis also disproportionately affects students of color and lower income students. Since these students are the most likely to need student loans, and in return incur more debt, the college education system puts them at a direct disadvantage that often causes them to drop out before finishing degrees.

Because of the higher likelihood of lower income students and students of color to accrue more debt and drop out before attaining degrees, Warren’s plan also has provisions to directly address socio-economic and racial disparities in secondary education. The plan is to create a $50 billion minimum fund for historically black colleges and universities (HBCUs) and minority-serving institutions (MSIs) to equalize spending per-student, provide more federal funding to states that make strides in raising enrollment and graduation rates of minority and lower income students, cut off for-profit colleges from receiving federal aid, prohibit the consideration of citizenship status of students during admissions and more.

After embarking on mass debt-cancellation, Warren plans to leave the days of crippling student loans behind for good by making college an extension of the free K-12 education afforded to the American public and proposing universal free college. This provision would eliminate the cost of tuition and fees at public two- and four-year colleges.

To achieve universal free college, the federal government would work with state governments in dividing the cost of tuition and fees without affecting their current funding for need-based financial aid. For example, Warren proposes investing $100 billion in the Pell Grant over 10 years. With the investment, the plan looks to expand who is eligible for the Grant.

By eliminating tuition and fees, while simultaneously bolstering already existing financial aid like the Pell Grant, the debt-cancelation plan and the proposal for universal free college would make it easier for students to not only attend school, but do so comfortably by making it easier to pay for non-tuition costs like room and board or books.

Warren’s campaign cites that experts estimate that the debt-cancellation plan would be a one-time cost of $640 billion, and the addition of the Universal Free College program hikes it up to $1.25 trillion over a decade.

Warren has also provided a plan to pay for it: an “Ultra-Millionaire Tax.” This Ultra-Millionaire tax would affect only households worth more than $50 million, or the top 0.1 percent, by shifting the traditional income tax to a tax on wealth. This shift to taxing wealth instead of income is vital considering an income tax makes no allowances for other circumstances. If an individual owned $30 million worth in property, jewelry and cars, but makes $130,000 a year in income, they are taxed the exact same as a family who makes $130,000 despite the differing circumstances.

Once a household is worth $50 million, it’s taxed 2 percent on every dollar above that, until worth gets into the billions and it’s hiked up to 3 percent. Economists Emmanuel Saez and Gabriel Zucman, from the University of California-Berkeley, estimate that the Ultra-Millionaire Tax could create a total of $2.75 trillion in revenue in 10 years.

The plausibility of the Ultra-Millionaire Tax and thus the debt-cancellation plan is still up for debate since taxing wealth will be a difficult undertaking both constitutionally and logistically. The fact remains, however, that millions of individuals in and out of college are burdened by student loans that they may likely never see the end of. Whether Warren’s plan is the answer to vote for is up to each and every individual voter to decide.

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