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Elizabeth Warren Wants Her Proposed Tax on the Ultra-Rich to Alleviate Student Loan Debt

Warren's plan includes proposals for the elimination of student loan debt for most students, an expansion of grants for low-income students, and free public education.
Senator Elizabeth Warren speaks during an organizing event at the Arc in the borough of Queens in New York City on March 8th, 2019.

Senator Elizabeth Warren speaks during an organizing event in New York City on March 8th, 2019.

Senator Elizabeth Warren (D-Massachusetts) published a broad plan on Monday to reduce student loan debt. It's the newest plan in Warren's policy-first campaign strategy as she competes for the 2020 Democratic presidential nomination.

Despite lackluster initial fundraising efforts, Warren has continued rolling out detailed proposals, including plans for a corporate wealth tax, universal child care, and protections for public lands.

Warren's latest plan seeks to drastically alter higher education in America by forgiving up to $50,000 in student loans for those in households that earn less than $100,000. For those with family incomes between $100,000 and $250,000, any college debt would be partially forgiven (although less than $50,000). According to data and analysis from the Warren campaign, her plan would alleviate or eliminate debt for more than 95 percent of the 45 million Americans with student debt.

The plan expands upon 2017 legislation (known as the College for All Act) that Warren co-sponsored with Senator Bernie Sanders (I-Vermont), which would make public colleges and universities tuition-free for students with family incomes of less than $125,000 (which is 86 percent of the population). Warren's new plan calls for an increase in federal spending on higher education to eliminate tuition and fees for all students at public two-year and four-year colleges.

But Warren's proposal goes far beyond the College for All Act. It includes the expansion of grants for lower-income and minority students to cover additional costs including housing, food, books, and child care, as well as an additional investment of $100 billion for Pell Grants (federal grants for post-secondary education based on financial need) over the next 10 years. The plan also seeks to reduce racial inequities in higher education by forming a $50 billion fund for historically black colleges and universities.

The plan, Warren writes, will "[m]ake free college truly universal—not just in theory, but in practice—by making higher education of all kinds more inclusive and available to every single American, especially lower-income, Black, and Latinx students, without the need to take on debt to cover costs."

Compared to other candidates vying for the Democratic presidential nomination, Warren is far more progressive in terms of loan-debt relief for higher education. "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," Warren writes.

In total, the Universal Free College program, as Warren is calling it, is estimated by her team to cost $1.25 trillion. How does Warren propose to pay for it? By using funds from her previously proposed Ultra-Millionaire Tax, a 2 percent annual tax on the 75,000 American families with $50 million or more in wealth. According to the campaign, this would raise $2.75 trillion over 10 years.

But is a tax like this realistic?

Dwyer Gunn, writing for Pacific Standard earlier this year, says yes:

There's likely never been a better time to tax the rich. Income inequality and wealth inequality have reached historic levels, conditions which experts warn are threatening the fabric of American society. At the same time, the wealthiest Americans now pay less as a percentage of their income than they have since the mid-1980s. Voters like the concept too: In a recent poll conducted by Morning Consult ... a whopping 61 percent of all voters, and 50 percent of Republicans, supported Warren's [tax] plan.

Warren argues that student loan debt is burdening the economy. Her plan seeks to provide an "economic stimulus": She contends that those with higher education degrees (and without large amounts of student loan debt) are more likely to be consumers and provide economic engagement by becoming homeowners and taking economic risks, such as starting businesses.