On July 23, Sen. Elizabeth Warren (D-Mass.) introduced a bill that would forgive approximately $640 billion of student loan debt, specifically for lower and middle-income earners.
Warren and House Majority Whip Jim Clyburn (D-SC) introduced the Student Loan Debt Relief Act with the aim of boosting the economy while also tackling the racial wealth gap.
Warren’s plan, which was first unveiled in April, would provide up to $50,000 of debt relief for all borrowers earning less than $100,000. For those making over $100,000 proportionally less debt relief would be offered, while those earning $250,000 or more would not be eligible.
The legislation would not require anyone to submit an application. Instead, the Education Department would use existing income and debt information to determine who qualifies and automatically cancel the debt.
Warren's plan rivals a similar bill released by her presidential campaign opponent, Sen. Bernie Sanders (I-VT). Bernie’s plan would not just apply to individuals making $100,000 or less, but it goes further in eliminating all outstanding student loan debt, regardless of income.
Sanders introduced the bill with Reps. Pramila Jayapal (D-WA), Ilhan Omar (D-MN) and Alexandria Ocasio-Cortez (D-NY), who argue it’s important for everyone to have access to the same government benefits.
However, Warren argued her student debt plan included income because it’s aimed “directly at bringing down the black-white wealth gap in America.”
“The numbers we picked are the numbers that do that best,” she said at a press conference Tuesday. “They give the maximum help to the people who will help close that black-white wealth gap.”
Clyburn also opposed the notion of “opening the door and saying, ‘Everybody, you’re free to come in,’” when the plan is meant to target systemic racism and economic inequality.
“I get a little bit concerned when I see attempts being made to address a specific issue and the attempts get diluted by bringing everyone into the process,” Clyburn said, adding that “if the money were unlimited that would be one thing, but it’s not.”
Warren acknowledged that Black borrowers, specifically those who have attended an HBCU are most affected by the student debt crisis. As previously reported, the median student loan debt of an HBCU graduate is around $29,000, which is 32% higher than graduates of other public and nonprofit four-year schools.
While Warren’s bill does not yet contain any offset for the $640 billion, Clyburn said he would like to pay for the bill by reversing some of the tax breaks for higher-income individuals in the GOP tax plan.
Warren has also proposed the plan with a 2 percent “wealth tax” on individuals with a net worth above $50 million.
Beyond the direct cancellation of a large chunk of outstanding federal student loans, the Warren-Clyburn legislation also includes other provisions meant to ease loan repayment by refinancing private debt into federal student loans, lowering the interest rate on all existing federal student loans.
Under the plan, the federal government would suspend the collection of student loan payments for a year while the Education Department carries out the loan forgiveness program.
While the bill is not likely to go through a GOP-controlled Senate, Warren wants to “work it through the House so we can iron out any kinks and get it ready” if Democrats take control of Congress and the White House in 2020.