Bernie Sanders Wants Taxpayers to Pay Off All College Loans
The Democratic Socialist wants to absorb $1.6 trillion of student debt.
Not satisfied with having the government take over 20 percent of the economy with his Medicare-for-All program, the Vermont Senator wants the government to assume all debt taken on for education and make college absolutely free from here on out.
Sen. Bernie Sanders (I-Vt.) will propose on Monday eliminating all $1.6 trillion of student debt held in the United States, a significant escalation of the policy fight in the 2020 Democratic presidential primary two days before the candidates’ first debate in Miami.
Sanders is proposing the federal government pay to wipe clean the student debt held by 45 million Americans — including all private and graduate school debt — as part of a package that also would make public universities, community colleges and trade schools tuition-free.—WaPo, “Sanders to propose canceling entire $1.6 trillion in U.S. student loan debt, escalating Democratic policy battle“
That’s a wee bit expensive! How does he propose paying for it? Why, by taxing the rich, naturally.
Sanders is proposing to pay for these plans with a tax on Wall Street his campaign says will raise more than $2 trillion over 10 years, though some tax experts give lower revenue estimates.
Sanders is proposing to pay for the legislation with a new tax on financial transactions, including a 0.5 percent tax on stock transactions and a 0.1 percent tax on bonds. Such a levy would curb Wall Street speculation while reducing income inequality, according to a report by the Century Foundation, a left-leaning think tank, though conservatives warn it would stunt economic growth and investment.
Having already broken the piggy bank for pay for his healthcare plan, it’s not clear that there’s anything left to also do this. But he has supporters.
Sanders will be joined Monday by Rep. Ilhan Omar (D-Minn.), who will introduce legislation in the House to eliminate all student debt in the United States, as well as Rep. Pramila Jayapal (D-Wash.), co-chair of the Congressional Progressive Caucus, who has championed legislation to make public universities tuition-free.
With this proposal, Sanders is out-bidding the competition:
Sanders helped popularize demands for tuition-free college during his 2016 presidential campaign run but did less to emphasize solutions for those who had already left school saddled with debt. Since then, liberal Democratic lawmakers have called for increasingly aggressive government solutions for erasing existing student debt, with 2020 candidates Sen. Elizabeth Warren (D-Mass.) proposing $640 billion in student debt forgiveness and former housing secretary Julián Castro introducing a more modest debt forgiveness plan.
Still, it’s not just Republicans and fat cats who think this a bridge too far:
These proposals have faced fierce objections, including from some moderate Democrats, for giving taxpayer subsidies to educated Americans who, on average, have higher earnings than those with only a high school degree.
Advocates say the push reflects the growing recognition of the economic harm created by the nation’s soaring student debt burden, particularly on the millennial generation, which ballooned from $90 billion to $1.6 trillion in about two decades, according to federal data.
Conservatives and moderate Democrats are likely to raise concerns about these student debt forgiveness plans. They have pointed out that Democratic presidential candidates, including Sanders, have pushed more than a dozen expensive federal projects — including Medicare-for-all, the Green New Deal and large infrastructure improvements — projected to cost substantially more than the $1.5 trillion GOP tax law approved in 2017, at a time of already high deficits.
“The cost will march toward $3 trillion and benefit a lot of wealthy families and future high-earners,” said Brian Riedl, an analyst at the Manhattan Institute, a libertarian-leaning think tank. “Of all problems requiring a $3 trillion federal expenditure, the college costs of middle- and upper-class college graduates seem lower-priority.”
A fierce debate has raged in left-leaning policy circles as well as over whether canceling student debt offers too much help to families with higher incomes. The top 40 percent of earners would receive about two-thirds of the benefits from Warren’s plan, according to Adam Looney, a former Treasury official under President Barack Obama who is now at the Brookings Institution, a center-left think tank.
That number is likely to be higher under Sanders’s plan, given that proposals by Warren and Castro do not call for wiping clean the debt of those earning over six figures. Warren has proposed forgiving up to $50,000 in student debt for those earning under $100,000, or about 42 million people. Under Castro’s plan, borrowers would not have to repay their loans until their income rose above 250 percent of the federal poverty line — about $64,000 for a family of four — after which it would be capped.
Sara Goldrick-Rab, a professor at Temple University who specializes in higher-education financing, said she had mixed feelings about plans such as the one proposed by Sanders that involve forgiving all student debt.
“There’s a piece of me that has seen how widespread the pain is, including among people you might say are financially fine,” Goldrick-Rab said. “But there’s a piece of me that knows what the pot looks like, and says, ‘That’s not the best use of the money.’ ”
Still, there are defenders of the idea:
Other experts say these criticisms miss the mark. If the plans are paid for with higher taxes on affluent Americans, they will ultimately redistribute resources down the income distribution, said Marshall Steinbaum, a former researcher at the Roosevelt Institute who was recently hired as an economics professor at the University of Utah.
Student debt forgiveness would also help stimulate economic growth by freeing borrowers to buy homes and improve their credit, while primarily benefiting racial minorities, according to Steinbaum and researchers at the Levy Institute, a left-leaning think tank. Omar, who has student debt, said in a statement that the plan would “unleash billions of dollars in economic growth.”
Additionally, poorer Americans would see the percentage of their income held in debt fall much more dramatically than that of higher earners under the plan, Steinbaum said. Steinbaum has also disputed Looney’s analysis, arguing it ignores people who have so much debt they cannot pay.
Many advanced countries offer free or much more highly subsidized university education. But those countries also tend to limit access to college to only the very brightest students, relegating everyone else to trade school or other non-elite tracks.
Aside from the “Can we afford it?” and “Who’s going to pay for it?” questions, there are indeed fairness and incentive issues to consider.
While it’s certainly true that children of lower-income parents often adsorb heavy debt to give themselves a shot at a better life, many children of middle-class parents take on a lot of debt simply to maintain a middle class lifestyle while in school. Why should they be bailed out by the taxpayer while their peers who scrimped and saved get nothing?
Furthermore, since the federal government runs essentially no universities, the “free public college” program winds up being a massive subsidy for the states. Over the past twenty to thirty years, states have significantly lowered how much of the cost of attending state colleges and universities they subsidize for in-state students. This, increased administrative overhead, and an arms race to provide better amenities, and other issues have led to the skyrocketing cost of college. Still, there’s only so much parents and students can pay, so there is some downward pressure on costs. If the federal taxpayer is footing the entire bill, though, that’s gone. States will have no incentive to keep costs down.
The bottom line, then, is that it simply makes no economic sense to combine a European-style subsidy of higher education with the American system of open admission to college. Since we’re not going to go to tracking and limited admission, we should instead target programs to lower-income and otherwise disadvantaged students and those going into desired fields. A tuition forgiveness program for those who teach in our public schools—particularly in disadvantaged communities—or go into nursing and other community service roles is much easier to defend than Sanders’ grandiose plan.