For everyone waking up from a 30-year coma, emerging from life under a rock or visiting Earth from a planet with equitable higher education — student loan debt in the U.S. is a crisis, to say the very least.
America’s student loan debt totals a collective $1.5 trillion owed by 44 million Americans. Finally, a Democratic presidential candidate has announced they want to do something about it.
The campaign of Sen. Elizabeth Warren, D-Mass., released a proposal yesterday to “cancel $50,000 in student loan debt for every person with household income under $100,000,” and provide substantial relief for borrowers making over that threshold. The plan would give debt relief to over 95 percent of people with student loan debt and entirely forgive the debt of 75 percent. The plan would then secure debt-free education for future generations by guaranteeing universal free college.
As Warren’s proposal explains, this crisis was manufactured by negligence. Since state governments have invested increasingly less in community and four-year colleges, schools have been forced to raise tuition and fees to cover the gap. Student loan debt exploded not because students wanted to borrow more, but because they had to cover these rising costs.
These costs fall disproportionately on students and families of color, especially black and Latinx ones, who are more likely to need loans to pursue higher education. Because wealthier, white Americans have historically been afforded the opportunity to pursue a post-secondary education for lower tuitions and fees, addressing present student loan debt is one way to address the black-white and Latinx-white racial wealth gaps. Under Warren’s plan, 80 percent of black borrowers and 83 percent of Latinx borrowers would receive full student loan cancellation.
The country needs this proposal, not least because of the catastrophic consequences of student loan debt.
Researchers for the Federal Reserve estimated over 20 percent of the drop in homeownership among young adults can be attributed to increased student loan debt. Because homeownership is the primary way households build wealth in the U.S., this suggests loan debt — once considered a means of helping young adults become socially mobile through education — is itself a barrier to building wealth.
Under normal circumstances, folks shouldn’t be too concerned about how the federal government will pay for worthy social programs, but the way Warren wants to pay for this one is itself an effective policy. The plan will be funded through what she calls an “ultra-millionaire tax” — a 2 percent tax on wealth over $50 million, and an additional 3 percent surtax on household net worth above $1 billion.
The idea of wealth taxes was returned to mainstream policy discussions by the French economist Thomas Picketty in Capital in the Twenty-First Century, his 2013 historical analysis of wealth and income inequality. It isn’t that the U.S. needs new wealth taxes, Picketty said — it only needs impose them in a more progressive way. Don’t raise the total tax burden, just make the burden smaller and impose it the wealthiest households.
It is important to note Picketty’s collaborators, Emmanuel Saez and Gabriel Zucman, provide policy advice to the Warren campaign.
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Warren’s team projects the wealth tax would generate $2.75 trillion of revenue over ten years. Yeah — trillion. With a “trill.” This is more than enough revenue to cover the one-time cost of student loan debt cancellation ($640 billion) and the ten-year costs of universal free college program ($1.25 trillion).
Wealth taxes certainly raise revenue for important social programs, but they also serve an equalizing effect on the distribution of wealth in the United States. Since the late 1970s, the share of the country’s wealth going to the top 0.1 percent of households has tripled, from 7 to 20 percent. The share going to the bottom 90 percent decreased over the same period, from 35 to 25 percent.
Warren offers a proposal for equitable higher education that other policy-makers, even those considered the most radical, haven’t yet. One of the policies that closely resemble hers is the Debt Free College Act, proposed by Sen. Brian Schatz, D-Hawaii, and Rep. Mark Pocan, D-Madison.
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Though the bill aims to eventually eliminate tuition at two and four-year colleges, it does not address existing student loan debt.
Warren’s plan is the most comprehensive approach to creating an equitable and just higher education system. Given Wisconsin’s racial disparities in education and high student loan debt, Warren’s plan has great potential to increase accessibility to higher education for students of color.
It’s time for the federal government, and Wisconsin’s government, to treat higher education like what it is — a public right. This means alleviating existing debts that never should have been imposed, and forging a future free from these burdens. Regardless of whether Warren becomes the Democratic nominee, her plan should be a model all American and Wisconsin politicians should look toward.
Sam Ropa ([email protected]) is a senior majoring in geography and anthropology.