Democrat candidates views on how to manage student debt
Guest Post by Eli Hearne
Since the turn of the century, the price of college has slowly increased as a result of many different reasons. Because of these increasing prices, higher education in America has become difficult for many to afford. Millions of individuals around the country are forced each year to take out student loans from companies and the federal government in order to attend college or university and obtain their bachelor’s degree. Seeing this electoral potential, as the 2020 Presidential election is right around the corner, many democratic nominees buying for the opportunity to oppose Donald Trump have put forward their plan for how to tackle America’s student debt crisis.
Here is a breakdown on how some of the top polling democratic nominees plan to deal with the nation’s student debt problem:
Bernie Sanders: Eliminate Student Debt
College for All Act of 2019 - This legislation would eliminate the $1.6 Trillion of student debt which is held by 45 million people in the nation. Borrowers would not have to pay any taxes on the forgiven debt.
Sen. Sanders wants to provide $48 Billion a year to eliminate tuition and fees at all public four-year colleges and universities. According to Sanders, The goal of this is to cut the racial wealth gap for young Americans. This will help as nearly two-thirds of all student debt is held by women and black students who take out student loans at a higher rate and graduate with more debt than white students.
Elizabeth Warren: Tax the Rich
First, Warren would eliminate up to $50,000 in student loan debt for individuals with a household income of under $100,000. The amount of forgiven debt would decrease by $1 for every $3 in income above $100,000. Households making over $250,000 are not eligible under this plan. According to Warren, more than 95% of American student loan borrowers would get some benefit from this plan, but more than 75% will see debt eliminated entirely. This will also help to reduce the racial wealth gap. This plan will also provide a “middle-class stimulus” that will increase the value of homes, drive economic growth, and welcome a new era of small business innovations.
Second, she would make public college free for all. All students would have the opportunity, free of tuition and fees, to attend a two-year or four-year public college.
How will she do this? Through the Ulta Millionaire Tax which is a 2% annual wealth tax on the 750,000 families with an annual income of $50 million or more, she would have the funds for this plan.
Kamala Harris: Lower Interest Rates
Senator Kamala Harris wants for individuals with debt to be able to refinance their student loans at lower interest rates.
Harris also wants to make all two-year and four-year public colleges and universities tuition-free.
She does not feature any significant student loan forgiveness program as other candidates may. That being said, her plan does attempt to reduce the “opportunity gap” and increase black entrepreneurship through a program which rewards individuals who successfully start and run a business in a disadvantaged community for three years.
Joe Biden: Modify Loan Forgiveness
Former Vice President Joe Biden released a $750 billion dollar higher education plan which would attempt to simplify student loan repayment and forgive more loans. Biden’s plan would use “income-based repayment” for federal student loans. If you make less than $25,000/ year then you would owe no payment on undergraduate student loans and no interest would build. If you make more than $25,000/ year then you only pay 5% of your income over $25,000 towards your student loan payments. After 20 years of payment, the remainder of one’s federal student loans would be forgiven. Biden’s plan, although would not forgive all student loans, would provide individuals with the opportunity to earn up to $10,000/year of loan forgiveness for each year of national or community service done (for up to five years).
Further, Biden does not support all public colleges and universities to be tuition-free, but he does support two years of free community college with the federal government providing 75% of the funding and the states providing the other 25% of funding.
Each of these plans are different and face support and criticisms, but all battle the nation’s issue of fighting the student debt crisis. The other Democratic candidates have put out plans that either mirror or are critical to these four models. We will see in 2020 what policymakers will choose to do about this issue.
It is important to note that it's not advisable to stop repaying your student loans as even if elected, these candidates' plans might not be feasible because of financial and political challenges.
Have a specific question regarding your loans? Send it to FreeAdvice@moneycompass.io