Bernie Sanders has made erasing $1.6 trillion in student loan debt a key part of his presidential campaign, but his proposal will likely face a litany of political and practical challenges if he wins the general election in November.
The Vermont senator, a self-avowed democratic socialist, has emerged as the frontrunner in the Democratic primary in recent weeks, after back-to-back victories in New Hampshire and Nevada, and a neck-and-neck finish with Pete Buttigieg in Iowa. An average of polls by RealClearPolitics has him in first with a double-digit lead.
Sanders, in an outline released this week, estimated it would cost $2.2 trillion to make college tuition-free and to cancel all student debt over the next decade. To finance it, he proposed a “modest tax” on Wall Street speculation, a 0.5 percent tax on stock trades, a 0.1 percent fee on bond trades and a 0.0005 percent levy on derivative trades, that will raise close to $2.4 trillion in the next 10 years.
But canceling student debt, the largest non-mortgage debt in the U.S., is not necessarily popular with American voters. According to a September 2019 Wall Street Journal/NBC News poll, a majority of voters, 57 percent, oppose the idea of immediately canceling student loan debt for all borrowers. Still, the plan is more popular among Democrats. That same poll found that 63 percent favor the plan, while 34 percent oppose it.
On top of that, the bill that Sanders introduced last summer with Rep. Ilhan Omar, D-Minn., has just a dozen co-sponsors and has languished in the Democratic-controlled House.
Even Sanders’ progressive rival for the Democratic nomination, Massachusetts Sen. Elizabeth Warren, has introduced a more-tempered student debt relief plan, offering to cancel up to $50,000 in student loan debt for every household with a gross income less than $100,000, representing roughly 42 million Americans, or about three out of four borrowers. It would also partially eliminate debt for those who make as much as $250,000.
Warren has said she would use executive power to sidestep Congress and begin canceling the debt on her first in office. A Sanders campaign spokesperson told The Wall Street Journal that he hasn’t studied such a move but would look into the possibility.
Sanders has argued that totally erasing both federal and private student loan debt would help millions of borrowers lead a better financial life by freeing up money to buy a home, save for retirement, launch new businesses and start a family, as well as stimulate the economy.
About one in six American adults owe money on federal student loan debt and it’s been cited by many as a hindrance in people’s economic lives, including by Federal Reserve Chairman Jerome Powell.
“We bailed out Wall Street in 2008," Sanders tweeted in June. "It’s time to tax Wall Street’s greed to help the American people.”
His proposal would authorize the Department of Education to buy and cancel student loans from private lenders, covering any interest due and late charges. Unlike Warren, his plan would extend to wealthy borrowers, as well as graduate school students, which account for 40 percent of federal student debt, and those who attended elite universities.