The senator also joins other congressional Democrats including fellow Massachusetts US Representative Ayanna Pressley in asking for the current pause in federal student loan payments to be extended to 31 March 2022.
Payments were paused by the Trump administration at the start of the coronavirus pandemic, a move that was extended by President Biden to 30 September 2021 through an executive order he signed on his first day in office.
Ms Warren is particularly passionate about eliminating student loan debt – it was a major issue for her in her 2020 presidential primary campaign.
Speaking to MassLive she said of the two proposals: “If they do both of those things, that will completely eliminate student loan debt for 85 per cent of the people who currently carry it.”
She added: “And for the 15% of people who remain, it gives the Department of Education a chance to get them into the right repayment programs.”
Ms Warren says that eliminating debt at the $50,000 level is right because it “maximises racial justice and closes the racial wealth gap the most”.
“It would help nearly everyone who tried to go to college and it didn’t work out – the 40 per cent of student loan borrowers who do not have a college diploma and are truly struggling hard with student loan debt and would help a huge number of public school teachers and firefighters and people who want a chance to get out there and start their own businesses,” she says.
“It’s the right number, it’s where a lot of people intersect that we could transform an entire generation.”
Most of those who attend college take on debt, including student loans. When Ms Warren was campaigning prior to the pandemic, the typical monthly payment was between $200 and $299 a month, according to a 2018 Federal Reserve study on the economic well-being of households. Some 20 per cent reported being behind on their payments.
There is a distinct racial disparity in the default rate, with Black and brown borrowers having the most difficulty with loan repayments while facing lower wages, less support from family, or having dropped out before finishing their degree.
By forgiving $50,000 in student loan debt, approximately 36 million Americans would be entirely debt-free – including 9.4 million currently in default.
The Biden administration has proposed possibly cancelling $10,000 for each American with student loan debt. This would wipe out the debts of 15 million borrowers. The president is so far undecided as to whether he should take direct action or leave the proposal to Congress.
Ms Warren described that proposal as “better than nothing” but not enough to “help people who are struggling”, and “not enough to get the economic pop that we need”.
The senator believes that forgiving a larger amount of debt would give a significant boost to the national economy.
Not being content with just eliminating the bulk of student debt, Ms Warren maintains her desire to see the creation of a public alternative to college with free two and four-year degrees.
Under her plan, this would be paid for with a tax on ultra-millionaires in which households with a net worth of more than $50m would pay an extra two per cent tax on every dollar of their net worth above that amount. Those with more than $1bn would pay an extra six per cent above that amount.
Americans with less than $50m net worth would pay no additional taxes. The senator estimates that this could bring in $3.75 trillion in revenue over 10 years.
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