News for the East Bay's diverse, working-class majority.
Brought to you by the Democratic Socialists of America, East Bay chapter.
January 02, 2020
By Stephanie Hung
Bernie Sanders (D-VT) and Elizabeth Warren (D-MA) have both released expansive student loan debt forgiveness plans, unlike the rest of the Democratic primary field. Both Sanders and Warren acknowledge that it is outrageous that 45 million Americans owe $1.6 trillion in student loan debt. But their plans are very different. Which one is better for borrowers?
Warren’s plan operates on the idea that “those who can afford it should pay for it,” providing the most amount of aid for people with the lowest incomes. Sanders advocates for universal debt cancellation, which would not only eliminate giant burdens on many people but has the potential to drastically transform society.
Warren’s plan is much more complicated than Sanders’. Her plan would cancel up to $50,000 for every person with a household income of less than $100,000, and every $3 of household income over $100,000 reduces the amount of debt a person can have forgiven by $1. No borrower with a household income over $250,000 would qualify for debt forgiveness. So, if you have a household income of $130,000, then you would qualify for $40,000 of debt forgiveness. Warren’s legislation would cancel up to $640 billion of the $1.6 trillion total student debt load, or just 40% of all debt.
Bernie Sanders has a more straightforward plan: cancel student debt — all $1.6 trillion of it. Under Sanders’ plan, a person’s income does not affect their eligibility for debt forgiveness, and there is no cap on the amount of debt an individual can have forgiven.
If you are one of the 1.2 million people carrying a six-figure balance, or someone with a household income significantly upwards of $100,000, Warren’s plan will not provide much relief. Granted, there are reasons for thinking it makes sense to limit the amount of debt relief individuals can receive. But the case for a more restrictive plan doesn’t stand up to scrutiny.
One might think that Warren is right to exclude higher-income earners from debt forgiveness, because those with higher-incomes are better able to pay off their debt. But household income is at best a very crude indicator of a person’s financial situation. (Consider the fact that, in San Francisco, a four-person household with a net income of $117,000 qualifies for affordable housing.) Assessing a person’s ability to pay in terms of household income ignores other important factors, such as cost of living, other significant expenses (e.g., medical bills), and family size.
Another argument for restricting debt forgiveness to lower-income earners — and capping total forgiveness eligibility — starts from the premise that those with higher incomes or higher debt loads are more likely to have acquired student debt by pursuing advanced or professional degrees, and are therefore better able to pay off their debt. In fact, evidence suggests that many people with higher debt loads are not able to pay: 20% of recent borrowers who owed more than $100,000 defaulted in 5 years.
The student loan industry is reshaping higher education, molding colleges and universities into corporation-like institutions and privatizing higher education. These institutions are behaving in much the same way that mortgage brokers were a little over a decade ago, when they convinced people to buy homes they could not afford (which eventually led to the 2008 recession). Under this system, profit-driven entities like banks have a stake in increasing tuition rates and fees because their businesses depend on it. And they often manipulate students and parents into taking out loans that will burden them for the rest of their lives.
Sanders rejects this profit-driven model of education and the debt that comes with it. Along with his proposal for free public college, Sanders’ student debt forgiveness program reflects the idea that higher education should be a public good, not a source of profits for powerful financial institutions.
Pundits have praised Warren’s plan for its potential to shrink the racial wealth gap in the US. Student debt has most severely impacted African Americans, which exacerbates other financial burdens due to systemic racism (such as getting paid less than white people for the same work). Lower-income borrowers who owe more than $50,000 — the maximum amount that would be forgiven under Warren’s plan — are disproportionately black. Since Warren’s plan will leave many of these borrowers with large amounts of debt, it will not be as effective as Sanders’ in shrinking the racial wealth gap. Even if Warren’s plan does provide significant relief, many borrowers would be left with substantial debt that they may be unable to repay. Sanders’ universal plan would do more to decrease the racial wealth gap, disproportionately benefiting people of color.
Student loan debt is the second most common type of personal debt for Americans under 35. Large debt loads put intense pressure on borrowers to earn money to make payments. That pressure limits people’s ability to make decisions freely, whether it be a lawyer deciding whether to represent a high-profile corporate client versus a poorer client, or a nurse who is deciding whether to go on strike and risk going without pay for days or even weeks. Eliminating this giant burden means freeing millions of people from being held hostage by capital. Sanders’ plan would give people more agency over their lives and could drastically improve the lives of workers — for example, no one would have to stick with a job they don’t like just for the money or the student debt relief benefit. Without this debt, wages could be saved and used for starting a family, buying a house or a car, or going on vacation.
The only thing that borrowers are guilty of is getting an education in hopes of bettering their lives and following their dreams. Society should not punish people for the rest of their lives for this. Bernie Sanders’ plan promotes the idea of education as a public good, loosens the grip of debt profiteers on all Americans, and expands everyone’s freedom to live the lives they want.