By Brad Tuttle
April 22, 2019

Elizabeth Warren, the U.S. Senator from Massachusetts and 2020 Democratic presidential candidate, just introduced a plan that she says would be “truly transformational”: It’s a proposal that would upend higher education in America, simultaneously canceling student debt for 95% of people with existing loans, while offering debt-free college—with no tuition or fees—at every public college in the U.S.

Warren announced her plans on a post on Medium Monday morning. “It’s time for bold action to actually fix the debt crisis,” Warren wrote. “I’m calling for something truly transformational — the cancellation of up to $50,000 in student loan debt for 42 million Americans.”

Under Warren’s proposal, anyone in a household with income under $100,000 would receive student debt cancellation for up to $50,000 worth of loans. More than 75% of Americans with student loans would see their debts completely disappear. If you live in a household with income between $100,000 to $250,000, a smaller amount of your student loan debt would be eliminated — $40,000 if your household income was $130,000, for example, and $30,000 if your household income was $160,000. No student debt cancellation would be available for households with income over $250,000.

In the second prong of Warren’s plan to boost higher education for more Americans, the federal government would split the cost of tuition and fees at two- and four-year public colleges with the states where they’re located. In addition to offering free tuition at public colleges, Warren’s plan calls for an additional $100 billion over 10 years in Pell Grants, and an expansion of who is eligible for this assistance aimed at covering education costs outside of tuition and fees — including textbooks, lodging, meal plans, and such.

Senator Warren, who is trailing behind other 2020 presidential candidates such as Bernie Sanders and Kamala Harris in terms of fundraising, is adding free college and student debt cancellation to her platform that is already full of progressive proposals — including Medicare for All, childcare that is more affordable or even free, and higher taxes on corporate profits.

How realistic are Elizabeth Warren’s plans to pay off student loans and make college free for millions of Americans? Winning the 2020 presidential election is just one hurdle Elizabeth Warren faces to making her plans for debt-free college a reality. While the presidential candidate has released many details for her plans — including how the government would cover its estimated $1.25 trillion cost — many questions remain.

How Would Elizabeth Warren Pay for Student Debt Cancellation and Free College?

Senator Warren has previously announced her plan to pursue a wealth tax if she is elected president. That policy would add a 2% tax on the 75,000 U.S. households with wealth in excess of $50 million, and possibly an additional 1% tax on wealth over $1 billion. As we wrote in January:

It’s been estimated that Warren’s wealth tax would raise $2.75 trillion over 10 years, according to Emmanuel Saez, a left-leaning economist at the University of California, Berkeley. That would more than cover the estimated $1.25 trillion cost of her plans to eliminate student debt and offer free college. But as we noted before:

Who Would Benefit the Most from Elizabeth Warren’s Plans?

Obviously, the millions of Americans swimming in student loan debt, along with current and future college students of public universities, would benefit greatly from Elizabeth Warren’s new plan.

Lower-income and minority students stand to benefit in particular, Warren said, with the changes translating to higher college attendance and graduation rates — and higher incomes and wealth after college. The proposals would “substantially increase wealth for Black and Latinx families and reduce both the Black-White and Latinx-White wealth gaps,” Warren wrote.

Warren also wrote that student loan debt is partly to blame for the decline in American homeownership rates. Wiping out debt and making more college affordable, she argues, would help would-be homebuyers and in general act as a middle-class stimulus.

Who Could Be Hurt by Elizabeth Warren’s Plans?

Warren says her plans provide a stimulus to the economy in general, and she pointed to multiple studies indicating that “investments in higher education provide huge returns for every dollar.”

But not every individual or institution would come out a winner. The 75,000 wealthy American households confronted with the prospect of paying higher taxes would likely lobby strongly against Elizabeth Warren and her plans, and they could employ strategies to hide their wealth and avoid taxes if necessary.

Then there are the millions of Americans who have already paid off tens or even hundreds of thousands of dollars in student loan debt. This group may see Elizabeth Warren’s proposals as unfair, what with a younger generation of debt-free grads in much better position than their older counterparts to become homeowners, get married, have children, or pursue the career of their dreams rather than gravitating to the biggest paycheck to help pay off student loans.

America’s private colleges, some of which are already struggling to meet their enrollment targets and even shutting down entirely in a few cases, may find it even harder to compete for students and maintain a sustainable business model if and when tuition and fees are eliminated at state-run schools.

How Realistic Are Elizabeth Warren’s Plans?

While Elizabeth Warren’s college plans are ambitious, and the issues they raise are critically important for millions of Americans and the economy overall, is it even possible for her to cancel student debt and offer free college in one fell swoop?

Laws would have to be passed by Congress for Elizabeth Warren’s plans to become reality. Federal legislators would have to create laws that would forgive student debt and eliminate public college tuition and fees, and also overhaul the tax code so that Warren’s Ultra-Millionaire Tax revenues would be available to fund the plans. Even if Elizabeth Warren becomes president, these scenarios seem unlikely.

“Warren’s plan will almost certainly be met with opposition from congressional Republicans who argue that increasing taxes and federal spending harms the government’s fiscal health—and crimps the country’s economic growth,” the Wall Street Journal summed up on Monday.

Her “proposals are highly unlikely to gain the support of President Donald Trump or be considered in Congress while Republicans control the Senate,” Bloomberg reported. “But with control of the White House and Congress up for grabs in the 2020 election, the question of higher taxes on the rich promises to be a campaign topic.”

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