Education

Cancel Student Loans: Elizabeth Warren Has A Plan For That


Sen. Elizabeth Warren (D-MA) is a 2020 presidential candidate.

(Photo by Justin Sullivan/Getty Images)

When it comes to cancelling your student loans, Elizabeth Warren has a plan for that.

Here’s what you need to know.

Elizabeth Warren: Let’s Cancel Student Loan Debt

Sen. Warren (D-MA), a 2020 presidential candidate, introduced legislation today – the Student Loan Debt Relief Act – to cancel student loan debt for millions of Americans. The legislation largely mirrors what Warren has promised on the campaign trial since April. Warren will partner with Rep. James Clyburn (D-SC), the House Majority Whip, who will introduce corresponding legislation in the U.S. House of Representatives.

The ambitious student loan forgiveness plan would cancel student loan debt for more than 95% of borrowers, and would entirely cancel student loan debt for more than 75% of Americans with student loan debt. Warren believes that her plan would reduce the wealth gap in America and provide an economic stimulus to the middle class to increase home purchases and help start small businesses.

“The student debt crisis is real and it’s crushing millions of people — especially people of color,” Warren said in June. “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?”

According to the latest student loan debt statistics, there are more than 44 million Americans who collectively owe $1.5 trillion in student loan debt. Today, according to personal finance site Make Lemonade, student loan debt is now the second highest consumer debt category – second only to mortgages and higher than credit card debt and auto loans. By 2023, 40% of student loan borrowers may default on their student loans.

Specifically, Warren’s legislative proposal for student loan debt forgiveness would:

  • Cancel $50,000 in student loan debt for every person with household income under $100,000.
  • Also make private student loan debt eligible for cancellation.
  • Streamline the student loan debt forgiveness process using data and income information already available to the federal government.
  • Provide a year-long freeze for payments made by borrowers who are facing wage garnishment or debt cancellation (including interest accrual)
  • Allow borrowers to discharge student loans in bankruptcy
  • Refinance existing student loan rates to lower interest rates

Importantly, Warren’s plan offers no student loan debt cancellation to borrowers with a household income above $250,000, which she says is the Top 5% of earners. There would also be “phase-outs” based on income. The $50,000 cancellation amount would phase out by $1 for every $3 in income above $100,000. According to Warren, for example, “a person with household income of $130,000 gets $40,000 in cancellation, while a person with household income of $160,000 gets $30,000 in cancellation.”

How The Warren Proposal Would Be Funded

How would Warren pay for this student loan forgiveness plan?

Warren’s campaign proposal included an Ultra-Millionaire Tax that would include a 2% annual tax on the 75,000 families in the U.S. who have at least $50 million in net worth.

What About Private Student Loans?

Warren would allow private student loans – those student loans issued by non-governmental lenders to borrowers – to be converted to federal student loans, which would then be forgiven.

Will Borrowers Who Receive Student Loan Forgiveness Owe Taxes?

Warren’s plan would not make a borrower pay income taxes on the amount of student loan forgiveness a borrower receives.

Student Loans: 2020 Presidential Candidates

Like Warren, many of the 2020 presidential candidates have addressed the growing student loan debt issues and offered strategies on how to pay off student loans faster. Candidates including President Donald Trump, U.S. Senator Bernie Sanders (I-VT), Mayor Pete Buttigieg (D-IN), U.S. Senator Kamala Harris (D-CA), U.S. Senator Kirsten Gillibrand (D-NY) and others have proposed everything from tuition-free college to student loan debt forgiveness to student loan refinancing and public service loan forgiveness. 



READ NEWS SOURCE

This website uses cookies. By continuing to use this site, you accept our use of cookies.