Sen. Bernie Sanders (I-Vt.), who is running for the Democratic presidential nomination, is unveiling one of his signature policy proposals Monday, a plan to make public college free ― with a new element of eliminating all the student debt in the country.
The legislation is the most sweeping college affordability plan to date. It eliminates tuition and fees at public four-year colleges and universities, as well as community colleges.
It also would wipe out all the existing student debt ― $1.6 trillion, covering 45 million Americans.
Sanders’ plan, which was shared in advance with HuffPost, goes further than what Sen. Elizabeth Warren (D-Mass.) ― who, along with Sanders, occupies the progressive lane in the 2020 race — has proposed. While the two will be on different nights for this week’s first Democratic presidential debates, it introduces a key difference in approach on a prominent policy issue.
The Sanders bill eliminates all student debt, whereas Warren’s plan ― while still substantial ― covers $1.25 trillion for 42 million people. The difference is that Warren’s plan has caps.
Warren’s proposal forgives $50,000 in student loan debt for every person with a household income of $100,000. People between $100,000 and $250,000 in household income would have a portion of their debt forgiven, and people above that amount would get no cancellation.
Once she released her plan in April, Warren made forgiving college debt a major issue in the presidential campaign. It’s been one of her most high-profile policy proposals.
In the House, Sanders is joined by Rep. Ilhan Omar (D-Minn.), whose Student Debt Cancellation Act would cancel all existing federal and private student loans, and Rep. Pramila Jayapal (D-Wash.), whose College for All Act would cover the free college aspect.
The three will be holding a news conference Monday morning outside the Capitol, with Randi Weingarten, president of the American Federation of Teachers union, and several people who would have their student debt forgiven under the plans.
Sanders’ bill would also cap student interest rates at no higher than what the federal government pays for its debt ― so that the government isn’t profiting off student loan programs ― and provide at least $1.3 billion per year to eliminate or reduce tuition and fees for low-income students at two- and four-year, private nonprofit historically black colleges and universities.
In a statement, Sanders called his proposal “truly revolutionary.”
″[I]n a generation hard hit by the Wall Street crash of 2008, it forgives all student debt and ends the absurdity of sentencing an entire generation to a lifetime of debt for the ‘crime’ of getting a college education,” he said.
Sanders’ proposal to forgive all student debt, versus Warren’s proposal to cap the amount and base levels on income, highlights a key debate among supporters of debt forgiveness.
Black students are disproportionately affected by student debt compared to white students. The Brookings Institution found that four years after graduation, “black graduates have nearly $25,000 more student loan debt than white graduates.” Black students are far more likely to attend for-profit graduate schools ― which are often low quality and pile students with debt ― and they take on significantly more financial risk in going to graduate school.
Marshall Steinbaum at the Roosevelt Institute found that the racial wealth gap of white to black households was 12:1 in 2016, whereas it would be just 5:1 in the absence of student debt.
Supporters of the Sanders approach argue that data like these are reasons why all debt should be wiped out. Even people who currently may make a lot of money could also use financial assistance. They weren’t wealthy growing up, which is why they had to take out student loans to begin with. (Children of billionaires aren’t taking out loans for college.) They may have gone to school and done well ― becoming a doctor or lawyer, for example ― but that type of education is lengthy and expensive and can still take many years to pay off.
Critics of this approach say that taxpayers shouldn’t be paying off the student loans of the wealthy. In 2015, the public policy group Demos put out a report finding that debt forgiveness would increase the median net worth of both black and white families.
But Demos also concluded that blanket, all-encompassing debt forgiveness would exacerbate the gap between black and white wealth, since white individuals tend to seek advanced degrees in greater numbers ― and therefore may benefit more from a loan reduction policy that does not take income into account. The group argued that “targeted relief and scholarship programs may be preferable.”
Of course, this sort of legislation is also expensive. Sanders, Omar and Jayapal say they expect to give a significant boost to the economy. A February report from the Levy Economics Institute of Bard College found that wiping out $1.4 trillion in student debt would lower the unemployment rate, create new jobs and boost the gross domestic product by as much as $108 billion per year for the 10 years following the debt cancellation.
Sanders, along with Rep. Barbara Lee (D-Calif.), has already put forward legislation to pay for the plan, by imposing a small tax on the trades of stocks, bonds and derivatives, which would generate, they estimate, up to $2.4 trillion over 10 years.
“In 2008, the American people bailed out Wall Street,” Sanders said. “Now, it is Wall Street’s turn to help the middle class and working class of this country.”
Warren would cover her plan through her ultra-millionaire tax ― a 2% annual tax on the 75,000 families with $50 million or more in wealth.
Warren is expected to release her college debt plan legislation in the coming weeks, with a companion bill in the House introduced by Rep. James Clyburn (D-S.C.), the highest-ranking African-American member in Congress.
Julian Castro, a Cabinet official under President Barack Obama, has also put forward a proposal that offers partial loan forgiveness based on income.
But sweeping debt cancellation has not been embraced by many of the other candidates. Joe Biden, who is currently leading in the polls, expressed support for free college when he was vice president. But in a January interview, he scoffed at and mocked millennials ― many of whom are struggling to buy a house and achieve financial stability because of the student debt they face.
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