How realistic is Elizabeth Warren's plan to cancel student debt?
Democratic presidential candidate Sen. Elizabeth Warren unveils sweeping proposal to eliminate student loan debt and make all public colleges tuition-free; reaction from Peter Morici, former chief economist for the U.S. International Trade Commission.
Democrat Elizabeth Warren’s $1.25 trillion plan to cancel existing student loan debt and make college free has been slammed as a “sweeping bailout for the middle class” and a regressive giveaway to the wealthy at the expense of the poor.
“Her latest big idea — to eliminate vast quantities of student debt and make public universities tuition-free — is not a sound idea,” wrote the Washington Post’ editorial board on Tuesday.
“Her latest big idea — to eliminate vast quantities of student debt and make public universities tuition-free — is not a sound idea.”
Warren unveiled the far-reaching plan on Monday, pledging to cancel almost all student loan debt for 42 million Americans and introducing tuition-free college, with a total price tag of about $1.25 trillion over 10 years, including a one-off cost of $640 billion to cancel the debts.
Under the proposal, each person’s student debt would get a relief of $50,000 if household income is up to $100,000. Higher incomes would also be entitled to massive debt reductions, while only those households with earnings of over $250,000 would get no student debt reduction.
But as the editorial notes, spending over $640 billion to provide relief to graduates, who are defaulting on their student debts at a lower rate than before, comes at the expense of people who didn’t go to college at all and other priorities that would benefit the country better.
“What might be unfair is debt relief to the exclusion of other priorities with wider benefits, including to people who did not go to college at all,” the board wrote. “Ms. Warren proposes a wealth tax to cover the cost, the proceeds of which would then not be available for alternative, possibly more progressive uses.”
“What might be unfair is debt relief to the exclusion of other priorities with wider benefits, including to people who did not go to college at all.”
The tuition-free college, meanwhile, was lambasted by the newspaper as solely for the benefit of “the upper reaches” of income in the country as the children of rich parents will now be able to finish university debt-free even though their parents “are perfectly capable of helping defray the cost” of a for-profit school.
The board went on to praise Sen. Amy Klobuchar, another 2020 contender who’s viewed as a more moderate candidate, for saying during an event in New Hampshire that she can’t match Warren’s plan because it’s unrealistic.
“For us, though, policy priority is the essential concern. Student-loan defaults are concentrated among students who attended for-profit institutions, or who accumulated low loan balances but then dropped out and were stuck paying the money back out of lower-than-anticipated earnings,” the board wrote.
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“Such issues are hardest for students and families of color, as Ms. Warren correctly emphasized. This calls for a targeted approach that relieves the worst financial stress of those least able to handle it, not a sweeping bailout for the middle class and above.”
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