- Elizabeth Warren, D-Mass., on Tuesday introduced bicameral legislation outlining a key piece of her proposal to expand student loan forgiveness to 42 million federal and private borrowers.
- Put forward with House Majority Whip James Clyburn, D-S.C., the Student Loan Debt Relief Act would cancel up to $50,000 in debt for people with household incomes under $100,000 and gradually reduce the amount forgiven above that income threshold through $250,000.
- Remaining loan balances would be refinanced. Private borrowers will have the option to refinance their debt as Direct Loans, thus making them eligible for forgiveness under the proposal.
Warren formally announced the plan in June. But she indicated it was coming in April, when she made a broader proposal that put her in the ring with other Democratic presidential hopefuls looking to expand free college programs and eliminate the country's growing student debt load.
In a blog post earlier this year, she said the proposal to cut student debt would cost the government $640 billion. Add in the free college element, and the tab would grow to $1.25 trillion over the next decade. It would be financed by an annual tax of 2% to 3% on households worth $50 million or more, which would raise $2.75 trillion in 10 years, she explained.
Another contender for the 2020 Democratic presidential nomination, Sen. Bernie Sanders, last month announced a similar proposal to cancel student debt and lower college costs. Unlike Warren's proposal, his plan doesn't cap income for eligible participants. Other Democrats support less expansive free college proposals, The Chronicle of Higher Education reported.
Critics of debt elimination proposals, meanwhile, say such plans tend to benefit higher earners who can likely afford to pay off their loans in time and those who opted to attend pricier institutions. The expansion of free college, others say, could stress enrollment levels at four-year institutions.
The pitches come as the nation's student loan balance creeps past $1.6 trillion and colleges respond to the public's resistance to tuition increases by knocking down their prices — for individual students, certain groups or the entire campus. Meanwhile, more borrowers are looking to private loans as those options become more competitive. And some schools are evaluating alternatives to traditional financing options, such as income-share agreements.
Warren and Clyburn's proposal includes other protections for borrowers, such as not counting the forgiven loan amounts as taxable income, making it easier to discharge the loans in bankruptcy and offering a one-year window ahead of the cancellations during which the U.S. Department of Education would not collect payments or charge interest on loans.