Bernie is a man with a plan!
On June 24, Sen. Bernie Sanders, who is running in the 2020 Democratic presidential primary, announced his plan to get rid of the United States’ $1.6 trillion outstanding student loan tab. This move only further intensifies the policy debate on higher education ahead of the Democratic primaries. The 77-year-old Vermont senator is introducing the legislation with Rep. Ilhan Omar, D-Minn., and Rep. Pramila Jayapal, D-Wash., the co-chairwomen of the Congressional Progressive Caucus.
Outstanding education debt in the U.S. is expected to exceed credit card debt and even auto debt levels. Experts project college loan debt to balloon to $2 trillion by 2022. Currently, the average college graduate leaves school $30,000 in debt which is up from the average of $10,000 in debt from the 1990s. Today, more than one-quarter, 28% to be precise, of loan borrowers’ loans are either delinquent or in default.
In order to make some serious changes and eradicate the growing debt, Sanders’ plan of attack, “The College for All Act,” would erase student debt for 45 million Americans and would be paid for with a new tax on Wall Street transactions. Sanders’ “revolutionary” plan would make two-year and four-year public colleges and universities tuition-free and debt-free. Additionally, in Sanders’ plan, trade schools and apprenticeship programs would also be tuition-free.
Speaking of the plan, Sanders told the Washington Post, “This is truly a revolutionary proposal.” He added, “In 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.”
According to the senator’s office, the $2.2 trillion plan would be paid for by a new tax on financial transactions, which includes a 0.5 percent tax on stock transactions and a 0.1 percent tax on bonds, which would raise up to $2.4 trillion over the following 10 years.
However, the plan has already and quickly drawn critics. Following the announcement, Slate.com has run a headline, “Bernie Sanders Wants to Forgive All Student Debt. His Plan Doesn’t Make a Lot of Sense.”
In June, fellow Democratic candidate and Massachusetts senator Elizabeth Warren announced with Rep. James E. Clyburn (D-S.C.) a plan to introduce legislation in the Senate and House to eliminate up to $50,000 in student loan debt for 42 million Americans. However, it differs from Sanders’ plan because it caps student debt forgiveness at $50,000 and offers no relief to borrowers who earn more than $250,000.
In Warren’s plan, people who earn between $100,000 and $250,000 would be eligible for less forgiveness. In the plan, Warren wrote, “a person with a household income of $130,000 gets $40,000 in cancellation, while a person with a household income of $160,000 gets $30,000 in cancellation.”
On June 13, Warren said in a statement: “It’s time to decide: Are we going to be a country that only helps the rich and powerful get richer and more powerful, or are we going to be a country that invests in its future?”
Both Sanders and Warren’s plans have drawn criticism, commenting that the plans are too expensive and fail to target borrowers who most need relief. The top quarter of American earners hold about a third of the outstanding student debt. “Most borrowers are capable of repaying their student loans,” said Mark Kantrowitz, the publisher of SavingForCollege.com.
Meanwhile, proponents of the plan say these proposals addresses the burden of debt that has grown steadily over the last decade and stunted the financial lives of millions of Americans.
Research has found that forgiving student loan debt has many benefits, including raising Gross Domestic Product, adding more than one million jobs and increasing small business formation and homeownership rates.