Elizabeth Warren looking for more than incremental change. She wants generations.
The Massachusetts senator is pushing the Biden administration to take comprehensive measures to reduce the burden of student debt on the nation’s young people and is looking for free options for future generations.
Payments and interest on federal student loans will resume on October 1, following a pause imposed by the Trump administration during the pandemic. The administration pause was extended until September 31 for President Joe Biden who signed the order on the first day of his tenure.
Warren, Massachusetts Rep. Ayanna Pressley and other Democrats are calling for an extension of the hiatus until at least March 31, 2022.
She also calls on the White House to write off $ 50,000 in executive order debt for every American with federal student loans.
“If they do both, it will completely eliminate student loan debt for 85% of the people who currently carry it,” she told MassLive in a recent interview. “And for the remaining 15% of people, this gives the Ministry of Education a chance to involve them in the right repayment programs.”
Why $ 50,000?
This is the point that “maximizes racial justice and narrows the racial wealth gap as much as possible,” Warren said. “It would have helped almost everyone who tried to go to college, but it didn’t work – 40% of student loan borrowers who do not have a college degree and are really struggling with student loan debt, and would help a huge number of borrowers. public school teachers, firefighters, and people looking to enter the market and start their own businesses. This is the right number, this is the place where many people intersect, and we could transform an entire generation. “
Most of the young people who attended college borrowed, including student loans. Before the pandemic, the typical monthly payment was between $ 200 and $ 299 per month, according to the 2018 Federal Reserve Survey on Economic Well-Being of Households.
Of these, 20% said they were delaying payments. The numbers show significant racial disparities in default interest rates: black and brown borrowers report the most difficulty repaying loans – a larger percentage of them faced lower wages, less family support, or dropped out before completing a degree.
If each borrower is written off $ 50,000 on a student loan, 36 million Americans will be completely cleared of their student loan debt, including 9.4 million who are insolvent.
The Biden administration has offered the option of writing off $ 10,000 student loan debt, which would pay off 15 million borrowers.
During his 2020 campaign, Biden pledged to overcome the student debt crisis.
White House spokeswoman Jen Psaki indicated that the president is still weighing his options for taking action through an executive order or referral to Congress.
In public comments, Biden objected to forgiving more than $ 10,000 per borrower.
“The idea that you go to Pennsylvania and pay a total of $ 70,000 a year and the public has to pay for it? I disagree, “he said in an interview. The newspaper “New York Times in May.
When asked about the $ 10,000 offer, Warren highlighted her disagreement in an interview with MassLive. “There is simply not enough money. Not enough money. Look, this is better than nothing, but not enough to help the people who are struggling and not enough to get the economic growth we need. “
During the hiatus, borrowers reported that they had used potential repayment funds to pay off other debts or buy their first homes. If that number is large enough, Warren said, the country’s economy will experience long-term consequences, from an increase in the number of households to an expansion of entrepreneurship, when former students are given greater access to capital.
Warren told Western Massachusetts residents this month that she needed help to do this. She asked Americans to write or call the White House and sign petitions in support of the forgiveness plan.
Debt Cancellation is the first part of Warren’s two-step plan. The second involves the creation of a public alternative that allows free technical, two- and four-year degrees.
“When I was in college, I could go to a public university and get a four-year degree at $ 50 a month because the taxpayers supported this public university,” Warren said of her studies at the University of Houston. “I could get an education for the price I could pay as a part-time waitress, which meant that when I graduated I was ready to go. I was not held back by student loan debt. ”
She offers to pay the program with a super-millionaire tax, a proposal that caught the attention of the whole country during her 2020 presidential campaign.
The proposal assumes that families with a net worth of more than $ 50 million – roughly 75,000 of the richest families – will pay a tax of 2% (or 2 cents) on every dollar of their net worth in excess of $ 50 million and 6% (or 6 cents). cents). ) tax for every dollar over $ 1 billion.
Americans with a net worth of less than $ 50 million will not pay any additional taxes.
It will generate $ 3.75 trillion in revenue over a 10-year period, she estimates.
Between 2014 and 2018, the 25 richest Americans paid a tax equivalent to the 3.4% rate, according to ProPublica.
In 2007 Jeff Bezos, founder of tech giant Amazon and aerospace manufacturer Blue Origin, paid zero dollars in federal income tax, offsetting “every penny earned” in losses, interest expense deductions on debt, and even “the vague general category of other expenses,” according to ProPublica.
Taxpayers who earn about $ 70,000 typically pay income tax at a 14% rate, while couples who earn more than $ 628,300 pay the highest rate of 37%, ProPublica reported. The gains in the value of stocks, homes, vehicles and other investments of wealthy Americans are considered taxable income only after they are sold.
Warren’s proposal is explained by the fact that the tuition fees in some private colleges are too high. rose to over $ 70,000 in recent years.
She believes this will force colleges to become competitive in both cost and facilities. “If they have something to offer, there will be students and families willing to do it.”