Before American presidential elections 2020 take place, Democratic nominee Elizabeth Warren has caught the eyes and ears of the people.
As one of her campaign policies, she has sought to delete the student debt of Americans entirely. 2019 statistics show that Americans are burdened with high student debt. According to Quick Loans Direct, 3.7 million borrowers owe $124.3 billion in deferment, 2.6 million owe $111.1 billion in forbearance, 5.1 million owe $101.4 in default and 1.7 million borrowers who owe $43.9 billion are given a grace period. This is why there are currently over 45 million American debtors who owe a combined amount of $1.5 trillion.
After mortgage debt, student loan ranks the highest consumer debt. This is higher than even credit card loans. In 2017 students owed $28,650 individually.
Democratic candidate Elizabeth Nominee introduced her most daring plan yet: a $1.25 trillion scheme to terminate all student debt and cancel tuition in public schools
Reasons for Warren’s debt forgiveness
Recent Study shows that college graduates earn about $1 million in their lifetime which is higher than those with a high school degree. There has been a total growth of 157 % in student debt in the past 11 years. And it keeps growing. As more Americans take up higher education, the interest rates on student debt for private as well as public institutions have increased.
Education plays a key role in jet setting one’s life to a better place. It opens a million doors of opportunities. It certainly did for the senator. This is how Elizabeth Warren, born to a janitor, went on to teach, then was a professor of law, a US senator and now she is running for the presidential election. This is why college debt is so personal to her. She is certain that student debt stops millions of Americans from attaining the same potential.
What makes her plan unique is that it would benefit both the former and future students. Here’s what she believes her plan would do:
- Her motive is to eliminate up to $50,000 student debt for Americans with family incomes under $10,000 and provide additional debt cancellation for Americans whose household incomes fall between $100,000 and $250,000 (households earning above $250,000 will not qualify.)
Based on federal data alone, most Americans have their debts eliminated automatically. However, Warren’s plan would focus on those who are least likely to repay their debt. Her student debt free scheme is estimated to offer student debt relief to over 95 percent and eliminate student debt for 75 percent Americans.
- Her plan would also make tuition fees for public institutions-two years and four years free and increase the Pell Grant fund to pay for other college costs such as transport, housing, foods, and books.
- Generate a $50 billion fund for every minority-serving institution, and add more money subsequently.
- Stop for-profit institutions from receiving both federal and military benefits.
How Warren plans on achieving her proposals
As the only presidential nominee to propose a detailed plan on student debt forgiveness, Warren aims at making her plan a reality by spending $1.25 trillion over 10 years. Here is how she plans on doing it:
- Warren’s tax plan:
She will propose a per annum wealth tax for every wealthy American with assets above $50 million. Her tax plan would put a 2 percent yearly tax on Americans earning above $50,000 and an additional 1 percent for those above $1 billion (this includes the 75000 wealthiest families in America)
Warren’s wealth tax would likely raise $2.75 trillion in 10 years. Her tax plan incorporates three ways to fight tax evasion- increased funds for Internal Revenue Services; a compulsory audit rate for Americans who pay the wealth tax; and a penalty tax for those who own more than $50,000 and try to repudiate their U.S citizenship.
Challenges to Warren’s proposals:
- It will do little for huge borrowers: Her proposal might ease the debt for borrowers with six-digit loans. But for huge debtors, the scope is very little. For graduate programs that cost enormously, her plans will not be able to help much. Under Warren’s PSLF, physicians will be stable. However, groups with narrow access to PSLF eligible employment will receive little.
- It might welcome a constitutional amendment: Republicans have voiced their resentment against the proposal. This will require a battle and might end up at the Supreme Court.
- Wealth Tax could be taxing: Warren’s main condition of enacting PSLF is through a Wealth Tax. This will not be easy. Taxing the upper 1 percent for covering the debt of 45 million Americans sounds unreasonable. The elites know their way around. They have highly trained lawyers and tax executives at their back call. It won’t be easy to start a fight with them. Many expensive goods existing today got their break from earlier tax jurisdiction well before the 1960s when the top most marginal rates were above 60%. It will be a challenging proposal to put into action.
It is no doubt that the sky-high price of tuition fees and college fees have led to education being inaccessible to a large chunk of Americans. Even those privileged enough to pursue education end up being in debt for years or even for life. A change is needed. Warrens plan sounds promising, but it won’t be an easy way to implementation if she is elected POTUS.