Elizabeth Warren, D-Massachusetts, one of 19 Democrats who has announced plans to run for president in 2020, announced a plan Monday that would cancel the student loan debt of millions of Americans and offer free public college tuition to anyone who wants it.
Warren’s plan would be the largest and most costly student debt forgiveness and free tuition proposal of its kind.
Critics pounced immediately upon the plan’s price tag – $1.25 trillion over 10 years – and questioned the wisdom of letting colleges know it's OK to continue to increase tuition, since the loans will be paid by the government.
Lindsey Burke, the director of the Center for Education Policy at the Heritage Foundation, told The Atlantic, “Universities will continue to do what they’ve been able to do for decades, and that’s increase tuition because they [will] know there are policies like debt-cancellation and loan forgiveness.”
The Heritage Foundation is a conservative think tank.
Mark Huelsman, associate director of policy and research at Demos, a left-leaning think tank, told Marketwatch.com, that the plan “ensures that those who are most likely to struggle with debt don’t have debt anymore or never have to borrow for college again.”
Here’s a look at Warren’s plan, what it would do and what it would cost.
What would the plan do?
According to Warren’s campaign, the plan would eliminate student loan debt for 45 million Americans. That would represent 75 percent of all the student debt in the United States.
How would it work?
The plan would:
- Cancel up to $50,000 in debt for people whose household income is less than $100,000 a year.
- Cancel a smaller amount of debt for people who make between $100,000 to $250,000 a year.
- Offer college for free for anyone, regardless of how much you or your parents make a year.
The plan would not can student debt for those making more than $250,000 a year.
In addition, Warren wants to invest an additional $100 billion in Pell grants over the next 10 years. Pell grants do not have to be repaid, and are awarded to low-income students. Awards average about $6,200 per student, per year. Warren also wants to increase the size of the grant.
The plan would also cut off for-profit colleges from receiving any federal funds and create a $50 billion fund for historically black colleges and universities.
How much would it cost?
Warren’s campaign said the plan would cost around $1.25 trillion over 10 years.
How would it be paid for?
Warren has proposed a new tax on “ultra-millionaires,” or people making more than $50 million a year. About 75,000 Americans would fall under that category.
The tax plan would include a 2 percent tax on income above $50 million and a 3 percent tax on wealth above $1 billion.
“For two cents on the dollar, we could pay for universal childcare, universal pre-K, universal college and knock back the student loan debt burden for about 43 million Americans and still have nearly, just short of, $1 trillion left over," Warren said. "It tells you how badly out of whack our economy is right now."
The plan to pay for free college would include a request to states to help cover the cost of tuition and fees..
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