Janice Lozano
As part of her 2020 presidential campaign, Senator Elizabeth Warren proposed a plan to cancel student loan debt for more than 95% of borrowers, which would entirely eliminate student loan debt for over 75% of Americans with student loans. Warren's plan aimed to address the racial disparities in student borrowing and loan outcomes, curb the growth of student loan debt, and crack down on predatory lending practices. While some critics argue that broad-scale student loan forgiveness may require congressional legislation, Warren asserted that the Department of Education already has the authority to cancel student loan debt.
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What You'll Learn
Cancelling student loan debt for 95% of borrowers
Senator Elizabeth Warren, a former 2020 presidential candidate, planned to cancel student loan debt for more than 95% of borrowers. She proposed to cancel student loan debt on the first day of her presidency. This plan would have offered relief to 42 million Americans.
Warren's plan was to cancel $50,000 in student loan debt for every person with a household income under $100,000. There would be "phase-outs" based on income. For example, a person with a household income of $130,000 would get $40,000 in cancellation, while a person with a household income of $160,000 would get $30,000 in cancellation. The plan offers no student loan debt cancellation to borrowers with a household income above $250,000.
Warren argued that the Higher Education Act of 1965 gives broad powers to the U.S. Secretary of Education to manage the federal student loan program. This includes the ability for the Education Department to "enforce, pay, compromise, waive, or release any right, claim, lien, or demand" with regard to student loans. However, opponents argue that congressional authority would be required for any such action and that any attempt to cancel student loan debt would face legal challenges.
In addition to cancelling existing student debt, Warren's plan aimed to improve college affordability and curb the growth of student loan debt in the future. She proposed making public college and technical school tuition-free, supporting HBCUs and Minority-Serving Institutions, and working to close the racial gaps in access to higher education. Warren also wanted to address racial disparities in student borrowing and loan outcomes, with the Education Department's Office for Civil Rights conducting a wide-scale investigation.
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Eliminating predatory lending
Elizabeth Warren's plan to cancel student loan debt on the first day of her presidency aims to address the student loan crisis in the United States. This crisis has burdened millions of Americans, hindering economic growth and causing racial disparities in student borrowing and loan outcomes. Warren's plan includes eliminating predatory lending by cracking down on the financial industry's exploitation of students.
Predatory lending practices in the student loan industry have been prevalent, particularly during the 2000s, when private student lending skyrocketed. Lenders created products that benefited investors and schools rather than borrowers, often collaborating with predatory for-profit colleges. These lenders were not held accountable if borrowers couldn't repay their loans and profited from the sale of these loans in the asset-based securitization market. For-profit colleges, such as ITT, Art Institutes, and Brooks, encouraged students to take out private loans, knowing they were unlikely to be repaid. As a result, students and their families are still burdened with debt, often repaying the borrowed amount twice due to compounding interest.
To combat these predatory practices, Warren proposes to restore the office responsible for protecting students within the Consumer Financial Protection Bureau. This office provided $750 million in relief to student borrowers before it was disbanded in 2018. Additionally, she plans to investigate the emerging "income share agreement" industry, where schools and financial institutions offer loans that require students to sign away future income. These investigations will focus on violations of federal civil rights and consumer protection laws.
Warren also intends to address racial disparities in student lending, as the crisis disproportionately affects Black, Latinx, and Native American borrowers. The Education Department's Office for Civil Rights will conduct a wide-scale investigation into the roles of colleges, state higher education systems, and the student loan industry in contributing to these disparities.
Furthermore, Warren's plan includes tightening review processes and guidance for federal student aid programs to prevent conflicts of interest and ensure colleges act in the best interest of students. She will also work to improve college affordability and curb the growth of student loan debt by supporting new laws that make public colleges and technical schools tuition-free.
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Addressing racial disparities in higher education
During her 2020 presidential campaign, Senator Elizabeth Warren proposed a plan to cancel student loan debt for more than 95% of borrowers, which would entirely eliminate student loan debt for over 75% of Americans with student loans. Warren's plan aimed to address the student loan crisis, which has burdened millions of American families and hindered economic growth.
In addition to debt cancellation, Warren's plan sought to address racial disparities in higher education. Despite the existence of these disparities, there has been little investigation into how the student loan system contributes to racialized outcomes. Warren proposed that the Education Department's Office for Civil Rights would conduct a wide-scale investigation into the roles of colleges, state higher education systems, and the student loan industry in perpetuating racial disparities in student borrowing and loan outcomes.
The disparities are evident when comparing the debt owed by different racial groups 20 years after starting college. The median white borrower owes $1,000, while the median black borrower still owes $18,500. Latinx and Native American borrowers also face persistent disparities. Experts attribute these disparities to the racial wealth gap and racial discrimination in the labour market.
To address these issues, Warren proposed supporting HBCUs and Minority-Serving Institutions, working to close racial gaps in access to higher education and college completion, and ending for-profit colleges' access to federal student aid. Additionally, she planned to restore protections against for-profit colleges, such as re-instituting the gainful employment rule and tightening review processes for federal student aid programs.
Warren's plan aimed to provide relief to 42 million Americans burdened by student loan debt, addressing both the financial and racial inequalities inherent in the current system.
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Investigating for-profit colleges
During her presidential campaign, Senator Elizabeth Warren proposed a plan to broadly cancel student loan debt, provide universal tuition-free public two- and four-year college and technical school, and ban for-profit colleges from receiving federal aid. She intends to address racial disparities in higher education, crack down on for-profit institutions, and eliminate predatory lending.
The GAO (Government Accountability Office) conducted an undercover investigation into 15 for-profit colleges in 2010, finding that they encouraged fraud and engaged in deceptive and questionable marketing practices. The FTC (Federal Trade Commission) has also been active in this area, sending Notices of Penalty Offenses to 70 of the largest for-profits, warning them against unfair or deceptive practices.
The FTC has a long history of targeting false and misleading claims in education, and it has pursued several cases against for-profit colleges. For example, the University of Phoenix agreed to a $191 million settlement after being charged with using deceptive ads that falsely touted relationships with major companies. DeVry University paid $100 million to settle charges that it misrepresented the employment and salary prospects of its graduates.
Senator Warren's plan includes restoring the office responsible for protecting students at the Consumer Financial Protection Bureau, which provided $750 million in relief to student borrowers before it was disbanded in 2018. She also intends to investigate the "income share agreement" industry, in which schools and financial institutions offer loans that require students to sign away future income to pay for college, for potential violations of federal civil rights and consumer protection laws.
Additionally, Senator Warren proposes to restore protections against for-profit colleges that Betsy DeVos rolled back, including re-instituting and strengthening the Obama administration's gainful employment rule. She also intends to re-staff the office responsible for investigating fraud at colleges, moving it outside of the Education Department's Federal Student Aid office to eliminate conflicts of interest.
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Restoring bankruptcy protection for borrowers
Senator Elizabeth Warren has been a long-time advocate for bankruptcy protection for student loan borrowers. In the past, she has fought to keep student loans dischargeable in bankruptcy. However, Congress has repeatedly narrowed the grounds for student loan bankruptcy relief. As a result, student loan borrowers who cannot repay their loans are burdened with this debt for life.
In response, Senator Warren, along with Senators Durbin, Nadler, and Katko, introduced the Student Borrower Bankruptcy Relief Act. This legislation aims to restore bankruptcy protection for student loan borrowers by updating the federal bankruptcy code. It ensures that student loan debt can be discharged during bankruptcy, similar to other forms of consumer debt. The Act is intended to provide a safety net for borrowers with no other realistic options to relieve their debt.
The introduction of this Act is part of Senator Warren's broader plan to address the student loan crisis in America. She recognizes that student debt is a significant issue, impacting home ownership rates, small business creation, and racial disparities. Her plan includes cancelling existing student debt, improving college affordability, and curbing the growth of future student loan debt.
Senator Warren intends to utilize existing laws to implement her student loan debt cancellation plan, which aims to provide relief to millions of Americans burdened by student loans. She also plans to investigate predatory practices in the higher education system and protect students from financial exploitation. Additionally, Senator Warren proposes strengthening protections against for-profit colleges and tightening review processes for federal student aid programs. These measures demonstrate Senator Warren's commitment to addressing the student loan crisis and restoring bankruptcy protection for borrowers.
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Frequently asked questions
Warren plans to cancel student loan debt for 95% of borrowers, and entirely cancel student loan debt for 75% of borrowers. This plan will be implemented on day one of her presidency and will offer relief to 42 million Americans.
Warren's plan proposes to cancel $50,000 in student loan debt for borrowers with a household income under $100,000. There will be "phase-outs" based on income, with the $50,000 cancellation amount decreasing by $1 for every $3 in income above $100,000.
Warren has proposed an Ultra-Millionaire Tax of 2% on the 75,000 families in the U.S. with a net worth of at least $50 million.
Warren's plan for student loan forgiveness has not been implemented. During her 2020 presidential campaign, she stated that she would institute student loan forgiveness without Congress. However, opponents argue that congressional authority would be required for any such action, and it is likely to face legal challenges.
