Elizabeth Warren on Student Loans in 2019

Elizabeth Warren has served as the senior United States Senator from Massachusetts since 2013. In mid-April of 2019, Warren released her official presidential campaign platform regarding student loan forgiveness and college affordability. We’re going to break down Elizabeth Warren’s current platform and the past positions she’s taken on student loans and student loan forgiveness.

Elizabeth Warren 2020 Student Loan Platform

Warrens’ platform has two parts—student loan debt cancellation and Universal Free College. In her official article, “I’m calling for something truly transformational: Universal free public college and cancellation of student loan debt,” Warren explains what she plans to do, what results she expects, and how she plans to pay for it.

Student Loan Debt Cancellation

Warren plans to cancel up to $50,000 in federal and private student loan debt for 42 million Americans. She writes that her plan would help 95% of the 45 million borrowers with student debt. More than 75% of borrowers would have all their debt cancelled under her proposed plan.

But Warren’s new plan wouldn’t forgive everyone’s debt. It depends on how much your household makes and how much debt you have left. Here’s what she’s specifically proposing:

• Cancelling $50,000 in student loan debt for individuals whose annual household income is below $100,000
• Cancelling $50,000 in student loan debt for every individual with annual household earnings between $100,000 and $250,000 at a tiered rate; One dollar less in forgiveness for every three dollars you make above $100,000.
  • Example:  Jamie’s household makes $160,000 each year. That’s $60,000 more than $100,000. To figure out how much debt Jamie can have forgiven, take $60,000 divided by 3 to get $20,000. Then, subtract $20,000 from the $50,000 maximum. Jamie is eligible for up to $30,000 in forgiveness.
• No debt cancellation for the top 5% of households—those with annual incomes of more than $250,000.
• Cancelled debt is not taxable as income

Unlike current student loan forgiveness plans and repayment plans, Warren’s plan would happen automatically in most cases. Debt cancellation will be based on income and student loan debt information that the government already has. There won’t be a lengthy process, but rather an automatic one. If you have private student loan debt, that will take some extra steps as the government will need to work with you and your private lender.

Warren anticipates that this part of her plan will increase wealth for Black and Latinx families, which would in turn decrease the Black-White and Latinx-White wealth gaps. She also predicts that her plan will stimulate the middle class, boost the economy, and increase the number of homes purchased and the number of small businesses formed.

Universal Free Public College

Part 1 – Make 2 & 4-year schools free

Warren also hopes to help current and future college students with her universal free public college initiative. First, she wants to make it so that students can graduate from two-year and four-year colleges debt free. Her plan involves the federal government and states working together to make tuition and fees at public two-year and four-year colleges free in all states for all Americans. She also addresses the increasing costs of non-tuition fees like books, supplies, room, and board.

Here are the specifics of her proposal:

• The federal government and state government split the costs of tuition and fees
• Require states to maintain the same level of need-based financial aid and academic instruction funding
• Invest an additional $100 billion in Pell Grants over the next 10 years to help cover non-tuition expenses
• Expand the eligibility criteria for Pell Grants so that more low-income and middle-class students benefit

Senator Warren states that this part of her plan would ensure lower-income and middle-class students have the best chance of graduating debt-free. She also expects graduation rates to improve, since there’s a correlation between increased funding for non-tuition costs and improved graduation rates.

Part 2 – Help for low-income, Black, and Latinx students

Part 2 of Warren’s Universal Free Public College plan addresses inequities in higher education. She especially wants to create legislation that will aid low-income families, Black, and Latinx students. Discrimination, predatory practices, and underrepresentation of communities of color in four-year public colleges are just a few of things Warren cites as reason for her proposed reforms.

Here’s what she’s proposing:

• Create a $50 billion fund for Historically Black Colleges and Universities (HBCUs) and Minority-Serving Institutions (MSIs)
• Offer additional federal funding to states with improved enrollment and graduation rates for students of color and lower-income students
• Ban for-profit colleges from receiving federal money—these colleges have historically preyed on low-income students, Black students, and Latinx students
• Ban public colleges from considering citizenship status or criminal history while making admissions decisions
• Require public colleges to conduct a yearly audit that identifies shortfalls in enrollment and graduation rates for lower-income students and students of color and that offers proposed steps toward improvement

Estimated Cost of Warren’s 2020 Student Loan Platform

Experts predict Warren’s debt cancellation plan would have a one-time cost of $640 billion. Her Universal Free College program would cost approximately $1.25 trillion over ten years. That’s a total cost of $1.89 trillion.

Funding for Warren’s 2020 Student Debt Relief Platform

How does Warren plan to pay for all of this? On her official campaign website, Senator Warren states her intention to institute an Ultra-Millionaire Tax on some of America’s richest families in order to help rebuild the middle class. The money brought in would be used for the initiatives explained above and her other plans like universal childcare and Medicare for All.

The Ultra-Millionaire Tax is a 2% annual tax on the 75,000 families who have $50 million or more in wealth. Warren states that this annual revenue is more than enough to pay for student loan debt cancellation and universal free public college.

Elizabeth Warren Student Loan Legislation & Actions

College Transparency Act

Warren feels strongly that students need all the facts before deciding where to attend college and borrowing money to attend that college. In March of 2019, Senator Warren introduced the College Transparency Act to make that information accessible to all students. The act would require colleges to accurately report on specific student outcomes like enrollment, degree completion, and post-college success broken down by major.

Colleges would report the data and the National Center for Education Statistics would store the information, generate post-college outcome reports, and create a user-friendly website where families could access the information. Students can use this concrete data to make smart financial decisions about where to attend college. After all, college choice directly affects the amount of money you need to borrow to attend college.

Protecting Job Opportunities for Borrowers

Senators Warren and Rubio reintroduced the Protecting Job Opportunities for Borrowers Act in February 2019. This act would prohibit states from suspending, revoking, or denying professional, teaching or driver’s licenses just because a borrower entered default or fell behind on their student loan payments. In reference to the act, Warren is quoted saying that “we shouldn’t punish people struggling to pay back their student loans by…preventing them from going to work and making a living.”

Warren and Rubio hope that the bill will keep workers employed so that they can continue to pay off their loans rather than leave them unemployed and without means to get out of default.

Debt-Free College Act

Senator Warren worked alongside other senators to reintroduce the Debt-Free College Act in March 2019. The goal of the bill is to make debt-free college a reality within five years. For every dollar a state spends to help students pay the total cost of attendance (tuition, room, board, books, supplies, etc.) without having to take on debt, the federal government will award that state a dollar in grant money.

Bank on Students Emergency Loan Refinancing Act

In March 2019, Senator Warren sponsored and introduced the Bank on Students Emergency Loan Refinancing Act, a bill to amend the Higher Education Act of 1965. The act would allow borrowers to refinance public or private undergraduate student loans at a 3.76% annual interest rate. This is the same rate offered during the 2016-2017 academic year. The refinance rate for graduate school loans and parent loans would be 5.41% and 6.41% respectively. It’s estimated that this bill would save borrowers an average of $2,000 over the life of their loan.

College for All Act of 2017

Along with Bernie Sanders and other senators, Senator Warren introduced the College for All Act of 2017. This plan is primarily associated with Senator Sanders, but Ms. Warren is a notable contributor. You can read our full coverage of Sanders’ College for All Act here.

Here are the main tenants of the plan that relate to student loans and ways to reduce student borrowing:

• Eliminate tuition and fees at public four-year colleges and universities for households making $125,000 or less annually
• Make community college tuition-free for everyone
• Restore the old method for calculating federal student loan interest rates, which would reduce student loan interest rates by about 50% and lower federal profit margins
• Let borrowers refinance their federal student loans at the interest rates being offered to new borrowers rather than at their loans’ weighted average interest rate rounded up to the nearest eighth of a percent
• Ensure that low-income students who receive Pell Grants can continue to use the money to cover non-tuition expenses like room, board, books, transportation, and supplies
• States and tribes must provide their poorest students with full rides, which includes tuition along with room and board
• Create a dollar-for-dollar match program where for every dollar the state spends on additional projects that help reduce higher education costs, the federal government will award a dollar
• Expand and triple the investment in work-study programs so that 2.1 million students—rather than just 700,000 students—can participate
• Reduce the cost of tuition for low-income students attending private nonprofit Historically Black Colleges and Universities (HBCUs) and Minority Serving Institutions (MSIs)

Student Loan Servicer Performance Accountability Act

In 2017, the Department of Education wanted to have a single loan servicer for the country’s trillion-dollar student loan portfolio. Senator Warren introduced a bill to stop that action and promote competition amongst student loan servicers. Why does it matter? Warren feels that promoting competition gives the servicers more incentive to improve their services for student borrowers and adds accountability. If one company services all the loans, Warren believes that it would lower the quality of assistance for borrowers who have questions and need help managing their debt. This bipartisan bill passed.

Limit Interest Rates for Certain Federal Student Loans

In 2013, Senator Warren co-sponsored a bill that would have placed interest rate limits on certain federal student loans. More specifically, it would limit interest rates for undergraduate Federal Direct Loans to 6.8%, for graduate Federal Direct Loans to 6.8%, and for Federal Direct PLUS loans to 7.9%.

Ultimately, this amendment was rejected, and an amendment with higher interest rate limits was accepted. Still, it illustrates her commitment to reducing the profits earned by the federal government from the student loan program.

Elizabeth Warren Student Loan Statements & Positions

Borrowers of Color Face a Disproportionate Student Debt Burden

Borrowers of color face a disproportionate student debt burden and Warren wants the federal government to act. In January 2019, she and some colleagues sent out letters soliciting feedback from relevant experts asking for suggestions on ways to improve federal policy and to make higher education more equitable. Warren is committed to doing better for and reducing the student debt burden for these students.

Oversight of the Department of Education Student Loan Program

Since the start of her senatorial career, Senator Warren has felt that effective oversight of the U.S. Department of Education student loan program is of high importance. She wants the Department held accountable for their actions, specifically those affecting college students and student loan borrowers. As part of this, she released a report in February 2018 entitled, “DeVos Watch, Year One: Failing America’s Students.” In it, she expresses her thoughts about how the Department is being run.

Elizabeth Warren Student Loan Forgiveness

Sponsored Legislation & Actions

Tax-Free Discharged Student Loans

In 2015, Warren helped ensure that students receiving a discharged Corinthian College loan would not have to pay taxes on that money. She and her colleagues wrote a letter to the Treasury Secretary, arguing that the discharged loans should be treated as a non-taxable event. In other words, borrowers shouldn’t have to report the discharged loans as income and shouldn’t have to pay a burdensome tax bill on the discharged loan amount.

This action saved those borrowers estimated thousands of dollars in taxes.

Statements & Positions

ITT Tech Discharge

Warren signed a letter in 2018 asking Secretary Betsy Devos to provide full student loan discharges to former ITT Tech students due to the company’s history of misconduct and misleading students. Warren believes that the thousands of students who were affected by the company’s bankruptcy and who filed a borrower defense claim should have their student loans forgiven.

Public Service Loan Forgiveness Support

In 2017, Elizabeth Warren co-wrote an op-ed for the New York Times with Bernie Sanders. In it, she expresses her support of the Public Service Loan Forgiveness program. Senator Warren also called for Congress to increase funding for the program and to fix the failures in student loan servicing that make it difficult for eligible borrowers to receive their loan forgiveness.

In October 2018, Warren also signed a letter written to Betsy DeVos calling for an overhaul of the Public Service Loan Forgiveness program to ensure that all qualified applicants have their loans forgiven. The letter also asks for the Department to make the application process simpler and more organized. The letter was sent after the first round of borrowers applied for the PSLF program but only 96 out of approximately 28,000 were awarded loan forgiveness.

Borrower Defense Rule

Borrowers defrauded by colleges are eligible for student loan discharge, which wipes away all eligible federal student debt. In 2016, the borrower defense rule was updated to give those borrowers more relief options. To have their loans discharged, borrowers need to file a claim. As of December 2018, more than 139,000 claims are pending, meaning borrowers are still waiting to hear back about approval.

In February 2019, Elizabeth Warren and 16 other federal legislators co-wrote a letter to Secretary of Education Betsy DeVos regarding their concerns over the backlog of discharge requests. Warren feels strongly that the borrowers with pending claims should receive prompt communication about the status of their claims. She also strongly feels that the borrower defense rule needs to be upheld.

Summary of Elizabeth Warren on Student Loans

In a nutshell, here are main views of Elizabeth Warren on student loans and student loan forgiveness based on her public statements and sponsored legislation:

• Public two-year and four-year colleges should be free for all students
• Cancelling a substantial amount of student debt will stimulate the middle class and boost the economy
• Reducing non-tuition college costs will help improve college graduation rates
• Federal and state governments need to work together to reduce non-tuition college costs and minimize student borrowing
• The government should not be profiting from student loans
• Eligible borrowers should receive their student loan discharge or forgiveness promptly
• The federal government needs policies to make higher education more equitable, especially regarding Latinx and Black students