Explore issues facing the United States, with an emphasis on progressive solutions.

Wednesday, July 24, 2019

Elizabeth Warren' Plan to Relieve Student Loan Debt

Will this Plan Fly?
Ellizabeth Warren has a plan to relieve student loan debt
Elizabeth Warren has a plan to relieve student loan debt

One of the key plans candidate for President Elizabeth Warren has is to forgive student loan debt.  On July 23, 2019, she and Representative James E. Clyburn (D - SC) introduced the "Student Loan Debt Relief Act of 2019".  Warren has been talking about this issue on the trail since April of this year.

Reducing the income gap, especially between white Americans and African Americans, is one of the important goals of this legislation.  According to a 7/23/19 article in Forbes.com by Zack Friedman, the plan would cancel student loan debt for more than 95% of borrowers.  Every student with student loan debt in a household making less than $100,000 per year could see up to $50,000 in student loan debt cancelled.  This amount decreases as household income rises.  No one who lives in a household of $250,000 or more would have their debt cancelled.

Warren's plan raises a lot of questions.  Is it fair to families that have been saving diligently to pay for college for many years?  What are the benefits to the country of such a program, which could significantly raise the federal deficit?  And why is higher education in the US so expensive (on average, Americans spend $30,000 a year on college, almost twice as much as the average in other developed countries - Amanda Ripley, The Atlantic, 9/11/18)?

The arguments for such a plan include that even a small reduction in debt would be beneficial, according to the Center for Responsible Lending, a consumer advocacy group.  Their analysis shows that a $10,000 benefit would totally cancel the federal student-loan debt of 61% of the more than seven million borrowers who are in default on their loans (Jill Berman, 7/24/19, Market Watch).

African Americans, with less income to pay for college than other groups, would benefit.  Not only because their incomes are lower, but because they face more prejudice in securing loans.

The question of fairness to families who have saved for college is key.  One response is that preventing bankruptcies because student loan debt is relieved is good for the economy.  If people don't have to spend so many years re-paying their student loans, they could be buying big ticket items like cars and houses sooner, stimulating the economy.

The last question is why is college in the US so expensive?  A plan to relieve student loan debt doesn't address this issue, but it seem like a big part of the problem.

Amanda Ripley explores this issue in the above-mentioned Atlantic article.  A few reasons seem to have driven up costs.  Americans tend to live at college - their counterparts in other developed nations tend to live at home.  This fact means that more money is spent on housing and food services here than elsewhere.

In an effort to balance their budgets, state governments cut funding to public universities and colleges.  These institutions had to compete to attract wealthy students from abroad and out of state.  Marketing expenses rose dramatically.  Private institutions followed suit, because they were losing applicants to public institutions.  There are other reasons, such as the expenses associated with being an institution that does a lot of research.  Generating lots of research makes a college or university more prestigious, but also more expensive, without necessarily benefiting students.

I believe that something has to be done to relieve student loan debt.  I am not sure if Warren's plan is the best, but she does "have a plan for that", and a pretty well thought out one, too.

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