When Senator Elizabeth Warren, a contender for the 2020 Democratic presidential nomination, joined House Majority Whip James Clyburn in unveiling an ambitious student debt cancellation bill Tuesday, she said they weren’t “looking for one headline” about the $640 billion proposal.
Clyburn, a member of the Democratic leadership, said he plans to push legislation that could pass in the House. The South Carolina lawmaker added that the bill was about making headway over headlines.
The lawmakers argued that the bill, which would offer up to $50,000 in debt relief to borrowers with incomes under six figures, would address a problem that had reached crisis proportions.
The comments also illustrated a contrast with the approach of Senator Bernie Sanders, another candidate for the Democratic nomination, who has introduced an even more expansive bill to cancel all $1.5 trillion in student debt. Without directly referring to the Sanders bill, Warren and Clyburn made a case that their bill more directly addressed the racial wealth gap and was more pragmatic.
“It was very important to the congressman and me that when we devised a student debt relief package, that it aimed directly at bringing down the black-white wealth gap in America,” Warren said at a news conference introducing the bill. “The numbers we picked are the numbers that do that best.”
In Clyburn, Warren is partnering with one of the most high-powered House Democrats. The Sanders proposal is being carried in the House by Representative Ilhan Omar, a freshman Democrat who’s gained notoriety for challenging President Trump. It’s also got the backing of fellow star freshman representative Alexandria Ocasio-Cortez and Representative Pramila Jayapal, the co-chair of the Congressional Progressive Caucus.
Warren and Sanders have proposed going much further than anyone else in the Democratic primary field to address outstanding student loan debt. Former San Antonio mayor Julián Castro has proposed a targeted debt relief plan. And some other presidential candidates, like South Bend, Ind., mayor Pete Buttigieg, have argued that debt cancellation should be attached to public service requirements.
In some sense, Warren and Sanders offering very similar proposals to address student debt. The contrast between the two bills, though, reflects the differences in their approaches to policy more broadly.
Student Debt and the Racial Wealth Gap
Warren said student debt has become a burden for a generation of students that creates a drag on the entire economy. But she said the effects of student loans have been consequential for black borrowers in particular. The average black borrower, she noted, owes more on her loans 12 years after graduating than she did when she left college. (Nearly half of black borrowers who entered college in 2003-04 defaulted on their loans within 12 years, according to recent federal data.)
“The day our bill gets signed into law, that black-white wealth gap would shrink by 25 points,” she said.
The legislation, like a campaign proposal Warren released in April, would grant up to $50,000 in loan relief for borrowers with incomes up to $100,000. Higher-earning borrowers making up to $250,000 would be eligible for graduated debt relief.
Clyburn, responding to a question about Sanders's bill, said lawmakers shouldn’t go about addressing that problem “by opening the door so that everybody is free to come in.”
Critics of expansive debt cancellation plans have argued they would be regressive because more benefits in dollar terms would go to high-debt, high-income borrowers who took out loans to obtain medical degrees or graduate credentials that pay off big over the long term.
Lanae Erickson, vice president for social policy and politics at Third Way, said debt forgiveness is regressive as a general policy but said the Warren legislation is “infinitely more nuanced and targeted” than the Sanders bill. While passage of a massive debt forgiveness plan is unlikely even in the House, she said, Warren also appeared to be thinking of how to enact her plan.
Some have argued for limited debt relief to target the borrowers struggling most. A report released this week by the Center for Responsible Lending found that providing $10,000 in debt relief across the board would mean total debt cancellation for 40 percent of current borrowers.
Marshall Steinbaum, an assistant professor of economics at the University of Utah who has argued for full debt cancellation, found in a recent working paper that more debt cancellation would have bigger effects in reducing the racial wealth gap. That means, he said, that the Sanders plan would do more to reduce the racial wealth gap.
“That's because the low-wealth households with more than $50,000 of debt outstanding, and who thus retain the balance under the Warren plan, are disproportionately black,” he said. “However, both plans substantially reduce racial wealth inequality relative to the status quo, and contrary to the conventional wisdom that student debt cancellation would worsen racial wealth gaps.”
A group of academics that analyzed the Warren campaign’s debt proposal found differently, concluding in April that universal debt cancellation would widen the wealth gap. Tom Shapiro, one of those academics and the director of the Institute on Assets and Social Policy at Brandeis University, said the different conclusions were a result of how researchers counted wealth -- his team included assets like cars -- and whether they examined both relative and absolute wealth gaps. Shapiro found the wealth gap grew in terms of actual dollars.
“Despite whatever technical or policy differences might exist here, the issue of student debt cancellation has broken through to the public,” he said.
Some of the organizations that advocate for student borrowers said they supported both the Warren and the Sanders legislation. Persis Yu, director of the National Consumer Law Center’s Student Loan Borrower Assistance Project, said either bill “would provide our clients life-changing and much-needed relief.”
Both Warren and Sanders have offered campaign proposals to enact free tuition at public colleges and universities along with student debt cancellation. Generation Progress executive director Brent Cohen said in a statement that any attempt to address college affordability should be accompanied by policies targeting current student borrowers.
“The solutions proposed in these two pieces of legislation would provide meaningful recourse for millions of borrowers and should be the start of efforts to correct our broken higher education financing system, not the end,” he said.