How Elizabeth Warren’s Student Loan Relief Plan Affects the Rich
Massachusetts Democrat Senator Elizabeth Warren and 2020 presidential candidate speaks during a She the People Voters Forum in Houston, Texas, United States, Wednesday, April 24, 2019.
Scott Dalton | Bloomberg | Getty Images
An independent analysis of Senator Elizabeth Warren’s student loan relief plan shows that it would likely help middle-income borrowers the most, a finding that could help allay one of the political left’s biggest concerns about debt. debt cancellation.
Some voices on the left argue that erasing university debt – a proposal supported by many progressives – would not accomplish exactly what supporters hope. The top quarter of U.S. earners hold about a third of all outstanding student loans, meaning that blanket loan cancellation would give high-income borrowers the most overall relief.
New study analyzing 2020 Democratic presidential candidate Warren’s plan – which cancels up to $ 50,000 in debt and cuts relief for high-income Americans – may in part reduce concerns about a windfall for Americans the most rich. The highest American income group analyzed, those earning more than $ 110,000, is largely aided by the senator’s measure: it would write off on average about $ 19,000 in debt for these borrowers, and 53% of them would get a total forgiveness of their loans, according to a study by the Urban Institute published on Thursday.
But the Massachusetts Democrat’s proposal would wipe out student debt for more than 80% of loan holders in each of the four low-income groups assessed in the study. They would all see a higher average forgiveness than the highest earners.
The phasing out of benefits for high-income student debt holders “succeeds in reducing” the benefits for higher income compared to low-income borrowers, said Matthew Chingos, vice president of data and policy on the education at the Urban Institute. Chingos previously told CNBC that it might be difficult for Democrats to oppose Republican tax cuts that benefit wealthiest Americans the most if they also support a sweeping debt relief plan that spurs high-income Americans.
Yet, in gross dollars, the biggest relief under Warren’s plan would go to student loan holders earning between $ 65,000 and $ 109,000 – largely because more people in this group are taking on debt to complete their loans. university studies and borrow more when they do. Chingos said, “There is always this concentration of benefits in the middle and upper middle income groups.”
Warren announced her student debt relief plan on Monday, adding to a list of proposals she has put forward to radically reshape the U.S. economy. The senator, who has long called for policies to control big business and the richest Americans, has sought to portray herself as one of the most populist voices in the Democratic primary.
Conservatives criticized the potential cost of Warren’s student debt proposal and whether it would be an efficient use of the money. Lindsey Burke of the Heritage Foundation supported that it would entail an “exorbitant cost for taxpayers” and “would not allow the objective of greater equality of access to education to be achieved”.
Warren’s debt measure would write off up to $ 50,000 in loans for people with incomes below $ 100,000. As incomes increase, borrowers would receive less relief. At the level of $ 250,000 – or the richest 5% of earners – forgiveness would be completely cut off.
His campaign calls the measure of student loans a gradual way to stimulate the economy and consumer spending, in large part because a tax on America’s richest families would fund debt relief.
“This is a very progressive proposition – we are taxing the fortunes of people with more than $ 50 million in wealth to enable student debt cancellation on 42 million low-income and middle-class Americans “said an assistant to Warren. The senator’s campaign also highlighted analysis showing the proposal would help close the racial wealth gap.
Debt relief for black borrowers represents 25% of total dollars remitted, while only 16% of all American households are black, according to the Urban Institute study. White loan holders would see about 59% of the relief, while white households make up 68% of the total in the United States, according to the study.
The effect would be less pronounced for Hispanic borrowers. They would see about 10% of the total dollars handed over and represent 11% of households.
Overall, people with incomes between $ 65,000 and $ 109,000 would get about 28% of the overall rebate, followed by those earning between $ 40,000 and $ 65,000, who would get about a quarter of. debt relief. People earning $ 22,000 or less would see 14% of the loan relief – in part because they have lower average debt than higher income groups.
The Urban Institute study estimates that Warren’s proposal would cost $ 955 billion. The political left’s assessment of the plan may depend in part on whether voters think loan relief is the best use of $ 1 trillion, Chingos said.
He noted that Democratic primary voters might decide they would prefer to see a down payment on “Medicare for All,” for example, with the same money.
Warren has already offered to use wealth tax revenues to fund universal child care, another plan that she says will stimulate the US economy.
– Correction: This story has been updated to reflect the fact that the top quarter of U.S. earners have about one-third of outstanding student debt.