On Elizabeth Warren's Student Debt Cancellation Plan And The Ensuing Debate

I want to talk about Elizabeth Warren’s plan for universal free public college and cancellation of student loan debt this week. 

One, because I think it’s important for the public to have a discussion on how we plan to tackle the ongoing student loan crisis that has saddled our generation with an incredible amount of debt. 

Two, because I think the critique the plan has gotten gets to the heart of a larger issue in the United States: a lack of community, and how that bears out in our economic system.

So first, let’s discuss what is inside the proposal. Warren is proposing that we cancel $50,000 in student loan debt for every person with a household income of less than $100,000 per year. For folks who make between $100,000 and $250,000, debt will also be canceled, but it’s phased out by $1 for every $3 over $100,000 the person makes. 

For the folks who make more than $250,000 per year, there is no debt cancellation, because, as Warren noted in her proposal, these people are in the top 5% of Americans when it comes to wages. For most, the cancellation would be automatic. Private student loans would be eligible for the cancellation. The debt canceled wouldn’t be taxed. 

Warren is proposing that in addition to the debt cancellation, the country would offer free education at two- and four-year public state-run colleges. The federal and local government would split the cost. Her plan will also create a fund worth at least $50 billion for historically black and minority-serving colleges. 

Wait, so how the fuck would we pay for it? According to Warren, it will cost $1.25 trillion over ten years. First, the plan is expected to create an economic stimulus, which would offset some of the spending. The second part of the plan is an ultra-millionaire tax, which would be levied on folks who make $50 million or more. 

We had a hearty discussion on the news in the She Spends Facebook group this week. It was great to see a variety of opinions and ideas about how to tackle the ongoing student debt crisis. 

One critique of the plan really stuck out in the debate that ensued, not only in our Facebook group but on the internet at large. It’s the idea that the folks who took on the debt knew what they were doing when the took it on.

I think it’s worth examining whether these people really do understand what it means. It’s rare that 17- or 18-year-olds have a strong grasp of what it means to have to repay $100,000. The counterargument to that is “well I knew that I was taking out debt” or that their parents should have taught them better. 

Of course, this is an argument that doesn’t hold up: anecdotes can’t trump data. A 2018 survey from Student Loan Hero showed that half of the respondents didn’t know that interest accrued on federal unsubsidized student loans. A remarkable 10% thought that if you don’t get a job out of college, you don’t have to pay off your loans. 

What’s more, is that the “smart” option -- the one where you live at your parents’ house and work part-time while going to community college or a state school -- still costs a lot of money. And while some people have made real careers without having a college education, a lot of folks would not be where they are today without having a college education on their resumes. It’s become a requirement for many industries.

Couple this with the fact that student loan providers often operate in predatory andunhelpful ways, and it becomes clear that this is clearly a problem with student loans, not with individuals who don’t know enough about money. 

I think what the discourse following the release Warren’s plan made clear is that personal finance cannot be divorced from the systemic issues we face as a country. And I think the critiques highlighted the lack of community we feel as a nation when it comes to addressing problems like student loan debt. 

When I think about student loan debt, I think about what it holds us back from. On the She Spends money diaries survey, we ask folks what they would do if they won the lottery. One of the biggest answers? Pay off student loan debt.

So what can we do about this? 

Check out Warren’s plan, and decide whether it’s something you’d support. Consider other plans to tackle student loan debt, like the one from Scholarship America, which is less all-encompassing, but equally as interesting. 

If you have student loan debt, think about your options for repayment. Consider refinancing, and check out the Student Debt Crisis website for information on making a plan for repayment. Even as policies like Warren’s are proposed, you should still work on paying off your loans. 

If you don’t have student loan debt (lucky you!), talk to your friends and family members who do. Ask about what went into their decision making before they took on the debt and ask about what they have to forgo while they’re working on making payments. 

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