Elizabeth Warren just vowed to scrap student-loan debt for 42 million Americans

(AP Photo/Nati Harnik)Sen. Elizabeth Warren proposed eliminating student debt for millions of Americans.

In an appeal to younger voters, Sen. Elizabeth Warren, a Democratic presidential candidate, has proposed wiping out student-loan debt for good for millions of Americans.

In a blog post published Monday, Warren, who announced her bid for president in February, proposed cancelling up to $US50,000 in student-loan debt for 42 million Americans. She said her plan would wipe out that debt for more than 75% of Americans with student loans, using funds from her proposed “ultra-millionaire” wealth tax, a 2% annual tax for families with more than $US50 million.

The plan would also spur an economic stimulus that would increase homebuying and create new businesses, Warren argued.

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Warren proposed cancelling up to $US50,000 in student-loan debt for every person with household income under $US100,000, phasing out by $US1 for every $US3 of income between $US100,000 and $US250,000. Warren said her plan would cost the government about $US640 billion.

“We got into this crisis because state governments and the federal government decided that …  they’d rather cut taxes for billionaires and giant corporations and offload the cost of higher education onto students and their families,” Warren wrote, adding, “It’s time to end that experiment.”

The total amount that young people owe exceeded $US1 trillion last year, their highest debt exposure since immediately before the financial crisis. What’s worse is that despite low unemployment, a significant number of graduates are working low-paying jobs, and their wage growth has stalled for years.

Some economists have predicted that 40% of borrowers might default on their student loans by 2023, which could have economic effects similar to those of the subprime-mortgage crisis.

The crisis, as Warren said, has hit black and brown families harder than white families. Black graduates default at five times the rate of white graduates, and a recent Wall Street Journal report found that graduates of historically black colleges had 32% more debt than students at other colleges and that most had not paid any debt in their first few years out of school.

Warren also proposed that federal and state governments partner to subsidise the cost of all public colleges and invest an additional $US100 billion in Pell Grants to help pay for non-tuition expenses.

“The enormous student debt burden weighing down our economy isn’t the result of laziness or irresponsibility,” Warren wrote. “It’s the result of a government that has consistently put the interests of the wealthy and well-connected over the interests of working families.”

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