Two of the current Democratic presidential candidates have recently released proposed policies on student loan forgiveness that could potentially affect students at the University of Rhode Island.
According to Marc Hutchison, the political science department chair, Elizabeth Warren’s proposed policy would forgive $50,000 worth of debt for households that make under $100,000 annually. Households making $100,000 to $250,000 would also have a portion of their debt forgiven. Households making over $200,000 would not receive any forgiveness. In total, her plan will cost approximately $1.5 trillion.
On the other hand, Bernie Sanders has proposed that all existing debt be completely forgiven. This plan is projected to cost approximately $1.9 trillion. Both of the proposals include limiting tax on the middle class and increasing taxes on the upper class. This would be done to offset the costs associated with student loan forgiveness.
Hutchinson said that if either of the proposals were to be passed, it would benefit those with graduate degrees more than it would benefit undergraduates.
“Student loan forgiveness disproportionately rewards people in the upper-middle class because the average student loan debt for [undergraduate] students is something along the lines of between 10,000 to 15,000,” said Hutchison. “It’s the people that have gone on to get professional degrees that we see a much higher average debt ratio. Statistically, it will probably benefit a little bit more people in middle and upper-middle, more so then it will affect the poorer population from a relative standpoint.”
Shanna Pearson, a professor in the political science department, said that critics to the proposals question the equality of relieving debt between those who choose to go to an expensive college and those who held a job during their college years in order to avoid debt.
“Both of the proposals that are out there are not going to make it through Congress in their current format,” said Pearson. “They are going to be modified significantly and I think looking at the current student loan programs that we have, provide some guidance there. What people should be pushing presidential candidates on how does anyone fix the underlying structural issues of rising tuition costs.”
Pearson said that the lack of state funding for public colleges forces them to increase tuition. This increase in prices oftentimes forces students to take out more loans and accumulate more debt. These are structural issues that need to be addressed, according to Pearson.
Economists argue that forgiving the $1.5 trillion in student debt could result in a massive increase in consumer spending, which would help the economy. Hutchinson said that if students are not making monthly student loan payments, they could use that money to make down payments and other purchases. However, Hutchinson said this economic boost would only be short-lived and eventually an equilibrium would be reached.