Elizabeth Warren is looking for more than incremental change. She wants generational.
The Massachusetts senator is pushing the Biden administration to implement a multi-part response to lowering the student debt burden on the nation’s young adults and seeks free options for future generations.
Federal student loan payments and interest are set to resume Oct. 1 following a pause implemented by the Trump administration during the pandemic. The administration’s pause was extended through Sept. 30 by President Joe Biden who signed an executive order on his first day in office.
Warren, along with Massachusetts Rep. Ayanna Pressley and other Democrats, are calling for the pause to be extended until at least March 31, 2022.
She’s also calling for the White House to cancel $50,000 of debt through executive order for each American with federal student loans.
“If they do both of those things, that will completely eliminate student loan debt for 85% of the people who currently carry it,” she told MassLive in a recent interview. “And for the 15% of people who remain, it gives the Department of Education a chance to get them into the right repayment programs.”
This is the point that “maximizes racial justice and closes the racial wealth gap the most,” Warren said. “It would help nearly everyone who tried to go to college and it didn’t work out - the 40% of student loan borrowers who do not have a college diploma and are truly struggling hard with student loan debt and would help a huge number of public school teachers and firefighters and people who want a chance to get out there and start their own businesses. It’s the right number, it’s where a lot of people intersect that we could transform an entire generation.”
The majority of young adults who attended college took on debt, including student loans. Prior to the pandemic, the typical monthly payment was between $200 and $299 a month, according to a Federal Reserve study on the economic well-being households in 2018.
Of those, 20% reported being behind on their payments. The numbers show a significant racial disparity in the default rates with Black and Brown borrowers reporting the most difficulty with their loan repayment — a higher percentage of whom faced lower wages, less family support or dropped out before completing their degree.
If $50,000 in student loan debt is forgiven per borrower, 36 million Americans would be relieved of their student loan debt entirely, including 9.4 million in default.
The Biden administration floated the possibility of canceling $10,000 in student loan debt which would wipe the debt of 15 million borrowers.
Biden pledged during his 2020 campaign to tackle the student debt crisis.
White House Press Secretary Jen Psaki indicated the president is still weighing his options on taking action through an executive order or leaving the matter to Congress.
In public comments, Biden has been opposed to forgiving more than $10,000 per borrower.
“The idea that you go to Penn and you’re paying a total of 70,000 bucks a year and the public should pay for that? I don’t agree,” he said in an interview with the New York Times in May.
When asked of the $10,000 proposal, Warren emphasized her opposition in an interview with MassLive. “It’s just not enough money. It’s not enough money. Look, it’s better than nothing but it’s not enough to help people who are struggling and it’s not enough to get the economic pop that we need.”
Amid the pause, borrowers reported using would-be repayment funds to pay down other debt or purchase their first homes. If the number is large enough, Warren said, the nation’s economy will feel the long-term impacts, from increased home ownership to more entrepreneurship, with former students allowed greater access to capital.
To achieve this, Warren told residents in Western Massachusetts this month, she needs help. She asked Americans to write or call the White House and sign petitions supporting the forgiveness plan.
Debt cancellation is part one of a two-step plan for Warren. The second involves the creation of a public alternative to allow for free technical, two-year and four-year degrees.
“Back when I went to college, I could go to a public university and get a four-year diploma paying $50 a month because taxpayers supported that public university,” Warren said of her undergraduate studies at the University of Houston. “I could get an education on a price I could pay for on a part-time waitressing job and that meant when I graduated, I was ready to go. I wasn’t held back by student loan debt.”
She proposes paying for the program with the Ultra-Millionaire Tax, a proposal that gained nationwide attention during her 2020 presidential campaign.
U.S. Sen. Elizabeth Warren speaks at her public meet and greet in Springfield Friday afternoon, July 9, 2021. (Hoang 'Leon' Nguyen / The Republican)
The proposal involves having families with a net worth of more than $50 million — roughly the wealthiest 75,000 households — would pay a 2% (or 2 cents) tax on every dollar of their net worth above $50 million and a 6% (or 6 cents) tax for every dollar above $1 billion.
No additional tax would be faced by Americans with net worths below $50 million.
Over a 10-year period, she estimates this would bring in $3.75 trillion in revenue.
A recent report published by ProPublica showed top billionaires have long used legal loopholes to sidestep tax burdens, as seen in leaked Internal Revenue Service files.
Between 2014 and 2018, the richest 25 Americans paid the equivalent of a 3.4% tax rate, ProPublica reported.
In 2007, Jeff Bezos, founder of tech giant Amazon and aerospace manufacturer Blue Origin, paid zero dollars in federal income taxes, offsetting “every penny he earned” with losses, deductions on interest expenses on debts and even “the vague catchall category of ‘other expenses,’” according to ProPublica.
Taxpayers who earn about $70,000 typically pay income taxes at a rate of 14%, while couples who earn more than $628,300 pay the highest rate of 37%, ProPublica reported. Gains in the values of stocks, homes, vehicles and other investments by wealthy Americans are only considered taxable income after they’re sold.
Warren proposal’s comes as the cost of attendance at some private colleges has risen to above $70,000 in recent years.
She believes it will force colleges to be competitive both about cost and amenities. “If they have something special to offer, there will be students and families who want to do that.”
DJCityQuamstyle on July 22nd, 2021 at 19:21 UTC »
While I agree 1000%, shouldn’t we also just not charge an arm and a leg for college?
Wardcity on July 22nd, 2021 at 17:06 UTC »
I remember sitting down with my mortgage officer and he’d mentioned paying down student loans first. I said have some loans around 3% and some are 6.8%. I said I want to tackle the 6.8 ones first as they’re obviously a worse rate.
that’s when he mentioned his daughter is in college right now and you can’t get a rate under 10%. I’m 31 and didn’t realize it’s only gotten worse.
Eyes_and_teeth on July 22nd, 2021 at 15:44 UTC »
When I graduated, I had to go through "Exit Loan Counseling" from my school's Financial Aid department. It was a hard requirement that had to be fulfilled in order to graduate.
They strongly advised everyone to consolidate their loans. My understanding is that this was (is?) common advice. They didn't explain that by doing so, your loans go from federally held to privately-owed, be so that any future governmental changes to student loan debt will mean fuck-all to you.
Moratorium on student loan payments/interest during a pandemic? Not you, Sparky!
Student loan forgiveness? Yeah, about that....
Edit: correction is shown above