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A Look Into Elizabeth Warren’s Free College Plan



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Massachusetts senator and Democratic presidential candidate Elizabeth Warren is taking charge of the heated national conversation regarding out-of-control college tuition costs. In April 2019, she released a $1.25 trillion proposal that addresses increasing college expenses and the widening student debt crisis.

“Higher education opened a million doors for me,” the senator wrote when she introduced the plan in a post on Medium . “It’s how the daughter of a janitor in a small town in Oklahoma got to become a teacher, a law school professor, a U.S. Senator, and eventually, a candidate for President of the United States. Today, it’s virtually impossible for a young person to find that kind of opportunity.”

The proposal contains two key measures:

•  Eliminating student debt (and the perpetual cycle of student debt)

•  Providing free college options for all Americans

The Free College Plan in a Nutshell:

Elizabeth Warren’s plan would cancel $50,000 worth of debt for anyone living in a household earning less than $100,000 a year. It would also provide a prorated amount of debt relief for anyone who lives in a household earning between $100K and $250K.

The debt would be canceled directly by the federal government (which provides the majority of student loans). If this proposal were to become law, it could provide debt relief to more than 42 million Americans.

The plan would be funded with a wealth tax , where $2.75 trillion worth of wealth would be redistributed over the course of a decade.
Here’s the plan in greater detail:

•  Tuition-free college: eliminating tuition and fees at all two-year and four-year public universities through a federal partnership with individual states to “split the costs of tuition and fees and ensure that states maintain their current levels of funding on need-based financial aid and academic instruction.” This would allow students to attend in-state programs without paying any tuition or fees, very much like American public schools.

Warren defends this component by predicting that it will increase graduation rates, especially among low-income students. According to the National Center for Education Statistics, only 41% of first-time/full-time students earn a bachelor’s degree in four years.

•  Debt forgiveness: Under Warren’s plan, about 95% of borrowers will be able to eliminate some student debt—for 75% of borrowers, all of the student debt will be eliminated. How? For every $3 a person earns over
$100,000
, the amount of debt canceled decreases by $1. Warren uses this example in her proposal: “a person with a household income of $130,000 gets $40,000 in cancellation, while a person with a household income of $160,000 gets $30,000 in cancellation.” Borrowers earning over $250,000 would not qualify for forgiveness, and debt cancelled would not be taxed as income. Private and federal loans would qualify for cancellation, which would take place automatically using data already available to the federal government.

Expansion of the Pell Grant

Warren also plans to “expand the funding available to cover non-tuition expenses.” For instance, a $100 billion expansion of the Pell Grant over the next 10 years. Pell Grants are awarded based on a student’s financial need.

These grants can be used for tuition and fees, room and board, transportation, books, supplies, and other education-related expenses. To apply, students with a high-school diploma or General Education Diploma (GED) must submit the Free Application for Federal Student Aid (FAFSA®). The maximum Pell Grant award during the 2019-2020 school year is $6,195 .

Who “Pays” for the Plan?

The cost of the plan—a one-time payment to the federal government of $640 billion—would be paid by an “Ultra-Millionaire Tax ,” which works out to an annual 2% tax on every dollar over $50 million, which would affect around 75,000 American households.

Pros of Elizabeth Warren’s Plan

If this plan were to be enacted, it may benefit many middle-class Americans. Most student loan borrowers owe between $20,000 and $25,000 in education debt, on average, according to the most recent Survey of Household Economics and Decision-Making (SHED) by the Federal Reserve Board.

Cons of Elizabeth Warren’s Plan

Of course, the free college plan has triggered immediate opposition from political opponents. Fox Business suggests that the plan will cost too much—about $2,000 per person.

“There is no free college education, who’ll pay the faculty and buildings and heating of the building and textbooks? Any of this, this is an amount tens of billions of dollars every year,” economist Ben Stein told Fox Business . “It’s highly irresponsible, and a U.S. Senator, which is a very high ranking position in this country, to go out and tell young people ‘look kids hang on a while, it will be free.’ That is wildly irresponsible.”

The New York Post suggests a law requiring colleges to refund a portion of the loan money when a student doesn’t make it to graduation. The pub says, “Colleges need to have skin in the game, so they’ll try hard to get students through the course of study and into the working world.”

Something to Consider in the Meantime: a No-Fee Private Student Loan

A competitive-rate private in-school loan may help you cover costs while this issue continues to be sorted out. If your federal aid award isn’t enough to cover tuition and your school-certified cost of attendance, a SoFi private student loan may be able to help fill the gap in your cost of attendance, with flexible repayment options to fit your budget. SoFi charges no fees, including origination, late, or insufficient fund fees.

Getting a SoFi private student loan allows you to become a SoFi member, with access to member discounts, career services, referral programs, financial advisors, and access to over 200 live events.

Once you’re a member, you can also have a conversation with a SoFi Financial Advisor, who can help you navigate your options and even discuss other financial plans, such as retirement planning, wealth building, saving for a home or family, and more.

See if a private student loan from SoFi is right for you.
Learn More


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Tax Information: This article provides general background information only and is not intended to serve as legal or tax advice or as a substitute for legal counsel. You should consult your own attorney and/or tax advisor if you have a question requiring legal or tax advice.
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