College Debt

Elizabeth Warren's Plan To Cancel College Debt Is a Giveaway to the Well-Off and Well-Connected

The Massachusetts senator wants to spend $1.25 trillion on a plan to wipe out student loan debt and make public tuition free.

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Elizabeth Warren, the Democratic primary's foremost Game of Thrones recapper, styles herself a staunch defender of the little guy. In her campaign announcement, for example, the Massachusetts senator declared that millions of American families are currently "struggling to survive in a system that's been rigged, rigged by the wealthy and the well-connected." She's a true champion of the struggling middle class, the sort of grounded and relatable politician who knows what it's like to be 29 years old and still sharing your parents' HBO GO password.

To prove her commitment to fighting a system that is rigged by and for the wealthy and well-connected, Warren yesterday announced a new plan (with Warren, there's always a plan) that would … provide more than a trillion dollars in aid to the wealthy and well-connected.

In addition to ending tuition at public colleges, Warren wants to cancel the vast majority of outstanding student loan debt. The idea is to eliminate debt up to $50,000 for people with household incomes under $100,000, and offer more limited debt cancellation for households making between $100,000 and $250,000. By her own estimates, the full plan, which also includes funds for Pell Grants and historically black colleges, would cost about $1.25 trillion, which she says she would pay for with a tax on wealth that she announced earlier this year.

On the surface, Warren's idea might sound like another expensive federal benefit for struggling families. But the nature of college attendance and student loans means that Warren's loan forgiveness plan is a massive giveaway to relatively well-off people.

In the U.S., only about a third of people over 25 have a college degree, making them a comparatively elite group whose elite status is reinforced by, among other things, the connections they make while at college.

On average, college graduates earn about $1 million more during their lifetimes than non-college graduates, according to a Georgetown University study. A separate study from Pew found that college graduates typically earn about $17,500 more annually than people who only had high school degrees.

College graduates aren't, for the most part, super rich. But generally speaking, they are far more comfortable than the majority who lack such degrees. And the rich, however you define that word, are a class comprised almost entirely of people who graduated from college (with, yes, a handful of notable exceptions). This is a plan that provides a rather large benefit for them.  

Warren's defenders might respond that it's still a downward transfer, since the whole thing will be paid for by a new tax on the super wealthy. There are, however, a few problems with this as a financing mechanism.

The first is that the tax might not be constitutional. Even if it is, the second problem is that it's likely to raise far less money than projected, which is one of the reasons that most countries that have tried similar sorts of taxes over the last two decades have abandoned them.

The third, as the Washington Examiner's Philip Klein points out, is that Warren has suggested that this same tax could be used to help pay for a whole slew of other progressive policy ideas, including Medicare for All, the Green New Deal, and subsidized child care, which, all together, would cost so much it's barely even worth estimating. (Okay, fine: about $42 trillion, give or take the GDPs of a few mid-sized nations.)

This is a little like finding a $20 bill on the street and using it to run up five $20 bar tabs. On the campaign trail, where inspirational speeches are more important than math, you can spend your imaginary wealth tax revenue however many times you'd like. In reality, you can only spend the money once.

I am always hesitant to label policies as class warfare, but here, it's hard to avoid the description. Warren wants to impose an essentially punitive tax on the rich to fund a program for the merely well-off. And she wants to use the revenue it hypothetically generates not to pay for social programs targeting the poorest and neediest, but to fund debt forgiveness for the comfortable, college-educated upper middle class—which is to say, the sort of people who spend a lot of time reading New York magazine essays about Game of Thrones. This is a different, and more expensive, sort of pandering than an essay about why Warren loves Daenerys Targaryen, but it's pandering all the same.

I am not without sympathy for those who have racked up tens of thousands in burdensome college debt, and, in the process, helped fund the installation of those august tools of higher learning, campus water parks. The higher education system has become far too dependent on federally-backed loans that encourage colleges to raise tuition, while also encouraging prospective students to borrow ever larger amounts, often to their own long-term detriment. That system should be dismantled. National Review's Kevin Williamson has some ideas as to how, which may include modest amounts of debt forgiveness.

But Warren is not looking to attack the systemic faults of higher education so much as to replace and expand them with an even more sweeping system of federal intrusion.

As a policy proposal, her plan will no doubt find supporters. But as a campaign gambit, I suspect it won't be enough. Despite her pedigree and preparedness, Warren is underperforming in this race. Once recent poll found her trailing behind Sen. Bernie Sanders and former Vice President Joe Biden—who hasn't even officially announced yet—in the state of Massachusetts. Elizabeth Warren, you may recall, is a senator from Massachusetts.

Yes, the race is still early, and she still has time to release another $42 trillion or so worth of policy proposals. But somehow I doubt that her student loan plan will be the one that moves her to the front of the pack. Warren has a plan for everything, except how to turn around her campaign.

College Debt Elizabeth Warren Election 2020