Elizabeth Warren is looking for more than gradual change. She wants generational.
The Massachusetts senator is pushing the Biden administration to implement a multi-pronged response to reduce the country’s young adult student debt burden and is looking for free options for future generations.
Federal student loan payments and interest are expected to resume on October 1 after a hiatus implemented by the Trump administration during the pandemic. The administration break was extended until September 31 by President Joe Biden who signed an executive order on the first day of his term.
Warren, along with Massachusetts Rep. Ayanna Pressley and other Democrats, are calling for the break to be extended until at least March 31, 2022.
She is also asking the White House to write off $ 50,000 in debt by executive order for every American receiving federal student loans.
âIf they do both of these things, it will completely eliminate student loan debt for 85% of the people who currently carry it,â she told MassLive in a recent interview. “And for the remaining 15% of people, it gives the Department of Education a chance to get them into the right reimbursement programs.”
Why $ 50,000?
This is the point that “maximizes racial justice and most closely closes the racial wealth gap,” Warren said. âIt would help almost anyone who tried to go to college and it didn’t work – the 40% of student loan borrowers who don’t have a college degree and are really struggling with loan debt students and would help a lot of the public school teachers and firefighters and people who want a chance to go out and start their own businesses. That’s the right number, that’s where a lot of people intersect that we could transform a whole generation.
The majority of young adults who attended university took on debt, including student loans. Before the pandemic, the typical monthly payment was between $ 200 and $ 299 per month, according to a Federal Reserve study of household economic well-being in 2018.
Of these, 20% said they were late in their payments. The numbers show a significant racial disparity in default rates, with black and brown borrowers reporting the most difficulty with their loan repayment – a higher percentage of them facing lower wages, less family support or having dropped out before graduating.
If $ 50,000 in student loan debt is forgiven per borrower, 36 million Americans would be fully discharged of their student loan debt, including 9.4 million in default.
The Biden administration has raised the possibility of canceling $ 10,000 in student loan debt, which would write off the debt of 15 million borrowers.
Biden made a commitment during his 2020 campaign to tackle the student debt crisis.
White House press secretary Jen Psaki said the president is still weighing his options to take action through an executive order or leave the matter to Congress.
In the public comments, Biden objected to the forgiveness of more than $ 10,000 per borrower.
“The idea that you go to Penn and pay a total of $ 70,000 a year and the public should be paying for it?” I don’t agree, âhe said in an interview with The New York Times in May.
When asked about the $ 10,000 proposal, Warren pointed out her opposition in an interview with MassLive. âIt’s just not enough money. It is not enough money. Look, it’s better than nothing, but it’s not enough to help people in trouble and it’s not enough to get the economic pop we need.
In the middle of the break, borrowers said they used potential repayment funds to pay off other debts or buy their first home. If the number is large enough, Warren said, the country’s economy will feel the long-term impacts, from increased home ownership to more entrepreneurship, with former students having better access to capital.
To get there, Warren told residents of western Massachusetts this month that she needed help. She asked Americans to write or call the White House and sign petitions supporting the pardon plan.
Debt cancellation is part of a two-step plan for Warren. The second involves the creation of a public alternative to allow free technical diplomas, in two years and in four years.
âWhen I was in college, I could go to a public university and get a four-year degree paying $ 50 a month because the taxpayers were supporting this public university,â Warren said of his education. undergraduate degree at the University of Houston. âI could get an education at a price I could pay for a part-time waitress job and that meant when I graduated I was good to go. I was not held back by student loan debt.
She offers to pay for the program with the ultra-millionaire tax, a proposal that caught the country’s attention during its 2020 presidential campaign.
The proposal implies that families with net worth over $ 50 million – roughly the richest 75,000 households – would pay a tax of 2% (or 2 cents) on every dollar of their net worth above of $ 50 million and a tax of 6% (or 6 cents)) for every dollar over $ 1 billion.
No additional taxes would be imposed on Americans with net worth less than $ 50 million.
Over a 10-year period, she estimates it would bring in $ 3.75 trillion in revenue.
A recent report released by ProPublica showed that top billionaires have long used legal loopholes to circumvent the tax burden, as leaked files from the Internal Revenue Service show.
Between 2014 and 2018, the 25 richest Americans paid the equivalent of a tax rate of 3.4%, reported ProPublica.
In 2007, Jeff Bezos, founder of tech giant Amazon and aerospace maker Blue Origin, paid zero dollars in federal income tax, offsetting âevery penny he earnedâ with losses, deductions on debt interest charges and even “the vague catch-all category of” other expenses, “according to ProPublica.
Taxpayers earning around $ 70,000 typically pay income taxes at a rate of 14%, while couples earning more than $ 628,300 pay the highest rate of 37%, ProPublica reported. Gains in value of stocks, homes, vehicles, and other investments of wealthy Americans are not considered taxable income until after they are sold.
Warren’s proposal comes as the cost of attending some private colleges has exceeded $ 70,000 in recent years.
She believes this will force colleges to be competitive in terms of costs and amenities. âIf they have something special to offer, there will be students and families who want to do it. “