The Passionate Responses to Elizabeth Warren’s Polarizing Student Debt Relief Plan
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The Passionate Responses to Elizabeth Warren’s Polarizing Student Debt Relief Plan

BRIAN SNYDER/Reuters

We told you yesterday about Elizabeth Warren’s new plan to make two- and four-year public colleges free for students and cancel up to $50,000 in student loan debt for millions of Americans.

The proposal generated a wide range of responses, including questions about the structure and fairness of the student debt forgiveness. “While experts who study student loan debt say widespread forgiveness would boost the economy, some question whether it is the most effective way to stimulate the economy — or the best method to ease the strain on the borrowers who need relief most,” CNBC’s Jacob Pramuk notes.

Some critiques, criticisms and defenses of Warren’s plan:

It could create some bad incentives: Len Burman of the Tax Policy Center said that the way Warren’s debt cancellation phases out for those with incomes between $100,000 and $250,000 “would create a strong work disincentive” and could potentially have some strange effects. “For example, well-paid young people with $50k in loans might quit their job when annual income reaches the phaseout threshold and take a vacation partly financed by their loan abatement,” he tweeted. “The labor market distortion could be avoided by stating at the outset that the amount of forgiveness will be based on prior-year income. Or it could be reduced by spreading the loan forgiveness over several years.”

It could drive up tuition: “Universities will continue to do what they’ve been able to do for decades, and that’s increase tuition, because they [will] know there are policies like debt-cancellation and loan forgiveness,” Lindsey Burke, the director of the Center for Education Policy at the conservative Heritage Foundation, told The Atlantic. “They enable universities to be as profligate as they always have been.”

It would be unfair, and could create a moral hazard: What about the people who chose to go to a less expensive school, or who made other life decisions in order to be able to afford college and student loans? “There are those who may have taken higher-paying jobs they didn't necessarily want to pay off loans. And there are those who have cut expenses to the bare bones to pay off loans while watching their friends with similar salaries eat out and travel and deprioritize paying off loans,” The Washington Examiner’s Philip Klein wrote, sparking a Twitter backlash. “Those who were more responsible will feel justifiably enraged at the idea that those who may have been more profligate will now get a bailout from the government.

It may not help people who need help the most: “People who go to college typically earn higher incomes than those who don’t. So debt forgiveness takes tax revenue — which comes from taxpayers, not from the money tree — and redistributes it to those who are relatively well-off,” wrote Michael R. Strain, director of economic policy studies at the right-leaning American Enterprise Institute. “I’d rather spend the marginal taxpayer dollar expanding economic opportunity for the working poor than giving a subsidy to relatively well-off households.”

Matthew Chingos, the vice president of education data and policy at the left-leaning Urban Institute, said the proposal could even be seen as Trumpian: “I think you also are going to see some concerns from the left that if you are wiping out all the debt, that that would be a pretty regressive thing to do,” he told CNBC. “And once you look at the numbers, this looks like the Trump tax cuts in terms of who it benefits. So it’s a little hard to be out there saying, well, ‘I’m against tax cuts for the wealthy, but at the same time I want to give this big handout to the wealthy.’”

But Warren has tried to address that concern: “The Warren plan expends resources on student debtors from upper-income families, but it is still broadly progressive,” says Democratic economist Jared Bernstein in The Washington Post. “Analysis from experts at Brandeis University, the University of Tennessee, and Arizona State University shows that among low and moderate-income families — those in the bottom 40 percent of the income distribution — close to 90 percent of borrowing households would have their student debt wiped out compared to just under 30 percent of those in the top 10 percent. Similarly, the proposal provides total cancellation for about 90 percent of those with an associate degree or less but provides total cancellation for about only 25 percent of those with a professional degree or doctorate.”

And let’s not forget how we got here: “Today's rising student debt is largely a result of policy choices. The short version of the story is that student debt is rising because college tuition is rising — and college tuition is rising, in large part, because state legislatures across the country have slowly been abandoning their commitment to fund public colleges and universities,” says The Week’s Joel Mathis. “Today's young students aren't less responsible than their predecessors. They're just getting far less help.”

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