Politics & Policy

Warren Shows We’re Already Forgiving Too Much Student Debt

Sen. Elizabeth Warren participates in the She the People Presidential Forum in Houston, Texas, April 24, 2019. (Loren Elliott/Reuters)
The senator's plan would forgive fewer graduates' debt than existing programs.

With her new proposal to forgive almost $1 trillion in student debt, Senator Elizabeth Warren (D., Mass.) has made an excellent case to immediately cut benefits from their existing levels under Obama-era student-loan programs, even if her plan is never enacted.

Despite her plan’s apparent generosity, it would impose limits on who can qualify for debt forgiveness based on income. It would also limit how much each borrower can be forgiven. Yet under the existing Income-Based Repayment (IBR) program, which Democrats in Congress and the Obama administration redesigned in 2010, borrowers can stand to have more forgiven than under Warren’s proposal. And while IBR forgives borrowers only after a repayment period, even borrowers who have high incomes are eligible for college-debt forgiveness.

Specifically, Warren’s plan would cap the amount of debt that can be forgiven at $50,000, an amount that is reduced on a sliding scale for borrowers earning over $100,000, offering no college-debt forgiveness for anyone earning above $250,000. It sure looks like Warren believes that no one should have more than $50,000 in federal student loans forgiven, and that higher-income borrowers should qualify for even less, or none at all if their incomes reach $250,000.

The existing IBR program, by contrast, places no limit on the amount borrowers can be forgiven, and there is no absolute income limit on who can receive loan forgiveness. Here is how the program works — and how borrowers earning over $100,000 can easily qualify for loan forgiveness well in excess of the limits that Warren recommends.

Under current law, anyone who takes out a federal student loan today can enroll in IBR and have his payments fixed at 10 percent of his income, less an exemption of $18,700 (which increases with household size). It does not matter if those payments are less than what is needed to repay the debt; that’s the point. Payments are based solely on income. Then, after 20 years of payments (or only ten years for those working in any government or non-profit job), all of the remaining balance is forgiven, no matter how high it is.

The U.S. Department of Education provides a handy calculator to show how borrowers can easily have more forgiven under current rules than what the Warren proposal would allow.

Consider someone with $80,000 in debt and a starting income of $60,000. According to the calculator, this borrower would have $62,000 forgiven under the current IBR program if he holds a government or non-profit job. That’s well above what Warren thinks is reasonable.

Or consider a borrower with a starting income of $75,000 and $150,000 in debt. The department’s calculator says he would have $88,500 forgiven after 20 years of payments under IBR. Again, that is well outside the limits of Warren’s proposal. And by the time this borrower receives debt forgiveness, his income would exceed $100,000 (the calculator assumes income increases by 5 percent annually), the income level at which Warren says borrowers should qualify for reduced loan forgiveness.

To be fair, the IBR program predates the Obama administration. But the changes that President Obama and Democratic lawmakers made in 2010 push the loan-forgiveness amounts beyond what even a far-left progressive like Warren believes are acceptable.

All lawmakers would need to do to keep the program within Warren’s prescribed limits is repeal the Obama-era changes. President Trump and congressional Republicans have proposed policies along those lines. They now appear to have a progressive, if unwitting, ally in that effort.

Jason Delisle — Jason D. Delisle is a resident fellow at the American Enterprise Institute.

Most Popular

Politics & Policy

The Problem with Certainty

EDITOR’S NOTE: The following is Jonah Goldberg’s weekly “news”letter, the G-File. Subscribe here to get the G-File delivered to your inbox on Fridays. Dear Reader (Including those of you having this read to you while you white-knuckle the steering wheel trying to get to wherever you’re going for the ... Read More
Politics & Policy

The Worst Cover-Up of All Time

President Donald Trump may be guilty of many things, but a cover-up in the Mueller probe isn’t one of them. House Speaker Nancy Pelosi, attempting to appease forces in the Democratic party eager for impeachment, is accusing him of one, with all the familiar Watergate connotations. The charge is strange, ... Read More

Theresa May: A Political Obituary

On Friday, Theresa May, perhaps the worst Conservative prime minister in recent history, announced her resignation outside of number 10 Downing Street. She will step down effective June 7. “I have done my best,” she insisted. “I have done everything I can. . . . I believe it was right to persevere even ... Read More
PC Culture

TV Before PC

Affixing one’s glance to the rear-view mirror is usually as ill-advised as staring at one’s own reflection. Still, what a delight it was on Wednesday to see a fresh rendition of “Those Were the Days,” from All in the Family, a show I haven’t watched for nearly 40 years. This time it was Woody Harrelson ... Read More
Politics & Policy

The Democrats’ Other Class War

There is a class war going on inside the Democratic party. Consider these two cris de couer: Writing in the New York Times under the headline “America’s Cities Are Unlivable — Blame Wealthy Liberals,” Farhad Manjoo argues that rich progressives have, through their political domination of cities such as ... Read More

The Deepfake of Nancy Pelosi

You’ve almost made it to a three-day weekend! Making the click-through worthwhile: A quick note about how National Review needs your help, concerns about “deepfakes” of Nancy Pelosi, one of the most cringe-inducing radio interviews of all time, some news about where to find me and the book in the near ... Read More
White House

For Democrats, the Party’s Over

If the Democrats are really tempted by impeachment, bring it on. Since the day after the 2016 election they have been threatening this, placing their chips on the Russian-collusion fantasy and then on the phantasmagoric charade of obstruction of justice. The attorney general accurately gave the ingredients of the ... Read More

America’s Best Defense Against Socialism

The United States of America has flummoxed socialists since the nineteenth century. Marx himself couldn’t quite understand why the most advanced economy in the world stubbornly refused to transition to socialism. Marxist theory predicts the immiseration of the proletariat and subsequent revolution from below. ... Read More