Progressive Plan Would Wipe Out Nearly All Student Debt

Congressional Democrats Hold Press Conference On Canceling Student Debt
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A majority of people with federal student loan debt would have no loan balance left if a progressive plan to cancel student debt becomes a reality, a newly released memo shows.

A one-time forgiveness of $50,000 would wipe out student debt for 36 million (80.2%) of the nearly 45 million federal student loan borrowers, according to a Department of Education (ED) memo released by Sen. Elizabeth Warren (D-Mass.) Tuesday. (A press release from Warren’s office put the number even higher, at 84%. It was unclear how that number was calculated, and a spokesperson for Warren did not respond to a request for clarification this week.)

Meanwhile, canceling $10,000 of student debt—President Joe Biden’s preferred sum—would erase the entire debt of 15 million people, 33.4% of all those with federal student loans.

Key Takeaways

  • A plan favored by progressives like Sen. Elizabeth Warren to cancel $50,000 of student debt would completely erase debt for more than 80% of people with federal student loans, according to a government memo released this week.
  • Forgiving $10,000—President Joe Biden’s preferred amount—would relieve the entire loan amount for one-third of federal student loan borrowers.
  • A Senate subcommittee hearing Tuesday examined the effect the $1.7 trillion in outstanding student debt has had on borrowers and the economy.

Warren released the memo before a Senate subcommittee hearing Tuesday, a meeting that examined the effect the $1.7 trillion in outstanding student debt—most of it owned or insured by the federal government—has had on borrowers and the economy as a whole. She used the figures to further the case she and some of her colleagues have been making for months now: that Biden should use executive authority to cancel billions of dollars in student debt.

The president and progressive members of his party both want to pursue so-called blanket loan cancellation, but remain apart on how to achieve it and how much forgiveness to provide. A president has never broadly canceled student debt before—and its legality has been questioned—but it seems to be inching closer to reality. This is especially the case after a provision of the American Rescue Plan passed last month nixed taxes on student debt that’s been forgiven.

Republicans, on the other hand, have not been sold on forgiving any student debt, calling it “a bailout,” and prefer reforms to the system. Sen. John Kennedy (R-La.), the ranking Republican on the subcommittee, said during the hearing, though, that his “mind is open.”

Reforms to limit the debt burden on students should be the ultimate goal but would take years to accomplish, Dominique Baker, a professor of education policy at Southern Methodist University, said at the conclusion of Tuesday’s hearing. She advocated for one-time forgiveness, saying it is not the final answer but instead could act as a bridge to larger changes.

“True reform necessitates that government works to both overhaul the system and provide relief for past shortcomings,” Baker said in her testimony. “For the student debt crisis, student loan cancellation is part of that relief.”

Warren, meanwhile, drew parallels to pandemic-era relief programs, approved by Biden and his Republican predecessor, Donald Trump, that paused student loan payments and interest accrual. (The pause on interest for federal student loans alone has saved borrowers $5 billion every month, the ED memo showed.) The senator said the federal government could now go further to prevent what she called “a financial cliff.”

Canceling $50,000 in student loans would completely erase the debt of 9.8 million people more than 90 days behind on payments, as well as the debt of 3.1 million borrowers, out of 4.4 million, still paying off their loans after more than 20 years, according to the ED data.