Elizabeth Warren: U.S. Should Pay Off Student Loans For 95% of Borrowers

In a statement sure to be welcomed by recent college graduates throughout the country, U.S. Senator and presidential hopeful Elizabeth Warren proposed canceling almost all student loan debt as well as making most two-year and four-year colleges free.

In a post on the website Medium, Warren proposed canceling $50,000 in student loan debt for anyone with annual household income under $100,000, which her campaign said would amount to 42 million Americans. It would also cancel some debt for those with household incomes between $100,000 and $250,000.

She proposes to pay for the initiative by implementing a 2% tax on family wealth that exceeds $50 million.

From her post:

We got into this crisis because state governments and the federal government decided that instead of treating higher education like our public school system — free and accessible to all Americans — they’d rather cut taxes for billionaires and giant corporations and offload the cost of higher education onto students and their families. The student debt crisis is the direct result of this failed experiment.

As states have invested less per-student at community colleges and public four-year colleges, the schools themselves have raised tuition and fees to make up the gap. And rather than stepping in to hold states accountable, or to pick up more of the tab and keep costs reasonable, the federal government went with a third option: pushing families that can’t afford to pay the outrageous costs of higher education towards taking out loans.

The senator believes that by making college free the country can encourage more young people to attend as well as increase the number of minorities who graduate from college.

But her proposal is missing several key elements.

States certainly did cut back on funding higher education during and after the financial crisis, shifting more of the tuition burden to students. But at the same time universities have increased their spending on administration and physical grounds instead of focusing on instruction.  Any direct payment from the U.S. government to universities will encourage more spending by the schools, not restraint.

Warren also fails to address the issue that less than 70% of those who attend college graduate, and not all of them leave for financial reasons.  There’s no evidence in her proposal that significant number of students who would do well at college are not attending due to finances.

Also missing from the senator’s proposal is any way to compensate those students who didn’t take out student loans to pay for college or who have already paid them off.  The program as she describes it will reward those who took out the biggest loans and made the fewest, if any payments.

 

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