Massachusetts Senator and Democratic presidential candidate Elizabeth Warren announced Tuesday that if elected, she would take executive action to cancel the vast majority of student loan debt on her first day in the White House. It is up for debate whether the president actually has that authority.
Kirk Carapezza, with WGBH's Higher Ed desk, spoke with WGBH All Things Considered anchor Arun Rath about what it would mean to cancel all that debt. This transcript has been edited for clarity.
Arun Rath: So, to start getting our heads around what this would mean, do you have any idea, in terms of a dollar amount, how much debt all that would add up to?
Kirk Carapezza: Well, Warren says her plan would wipe out up to $50,000 dollars for some 42-million Americans. So I wasn't a math major in college, but I think we're talking about some $640-billion dollars, give or take.
Rath: Wow, that's a lot of money. So how would Warren pay for that?
Carapezza: Well, the Warren campaign says she'd cover the cost with her proposed wealth tax, which we've heard so much about. This is a tax on uber-wealthy households, the 75,000 richest families in America.
Rath: So some of the kind of people that you've been covering in the higher ed scam ...
Carapezza: Yeah, they might be paying for it.
Rath: You've done a lot of reporting on student debt, how it affects the lives of people dealing with it, which are a lot of people. If all of that debt were to be canceled, what would that mean for this large group of people?
Carapezza: Many of the students and recent graduates at four year schools we talked to say, you know, their student loan debt is holding them back, preventing them from starting families or paying for childcare or buying a home. And Senator Warren argues her plan would also help graduates of for-profit schools like Corinthian Colleges, which shut down abruptly in 2014. Many of those students feel that they've been defrauded. And I think you'll remember the Obama Administration had promised them relief. But the Trump Administration and Education Secretary Betsy DeVos have ignored an order to stop collecting the student loans of thousands of borrowers who went to that defunct for-profit college. So this plan would help those students as well.
Rath: Now, again, given this massive amount of money, hundreds of billions of dollars - what about the effect on the economy, more broadly?
Carapezza: Well, the analysts I've spoken to say this would be a one-time stimulus. We should be clear. This plan would just help those people who've already gone to college. So this wouldn't affect current students or future students.
Rath: Can you talk a bit more about what people in the world of higher ed policy think of this idea? It sounds awesome, it sounds wonderful, and Elizabeth Warren isn't the first person we should note to float this. But about it in practice for the folks in higher ed?
Carapezza: Yeah, I spoke with Robert Kelchen. He's an associate professor of higher education at Seton Hall University. He thinks it's kind of dangerous to do policy this way through fiat rather than through Congress. He says Warren's plan helps people who already went to college and it could redistribute wealth to people who are already doing reasonably well. He also thinks it has the potential to reshape higher education in general and set the expectation that debt will be forgiven again in the future. So it kind of sets a precedent. Some also think that Warren and Vermont Senator Bernie Sanders are kind of dreaming of a Swedish or German model, where states and the federal government use taxes to free people of existing or future debt. Of course, Swedish students still have debt because of high living expenses. And the German model, which we reported on here at WGBH News, tracks students, so it isn't really open access. But economist Anthony Carnevale says amid all this political talk about college costs and student loans, we've added a whole new stage to the American life cycle. Back in the 70s, for example, you could graduate from high school, and whether you were male or female, you could be financially independent by about 25. That's not the case anymore, according to Carnevale."Nowadays, the age at which people reach the average wage for their gender is 32," says Carnevale. "So there's a whole phase in the life cycle, which includes both college education and work experience so that Americans are becoming financially independent later and later." And Carnevale says that whoever wins the Democratic nomination and ultimately the presidency, policymakers need to think about how colleges can help young people negotiate this space.
