Who Would Benefit from Elizabeth Warren’s Student Loan Forgiveness Proposal? – Education Next
Senator Elizabeth Warren (D-MA) announced an ambitious plan earlier this week that would cancel most outstanding student debt held by households making up to $250,000. Our analysis of federal data shows that this plan is likely to disproportionately benefit middle- and upper-middle-income Americans, as well as black families, at an estimated total cost of about $955 billion.
Warren’s proposal would forgive $50,000 of student debt for everyone living in a household with up to $100,000 in annual income and progressively smaller amounts for households with incomes between $100,000 and $250,000. We use data from the Survey of Consumer Finances (SCF), a nationally representative survey of households last conducted by the Federal Reserve Board in 2016, to calculate how student debt cancellation under Warren’s plan would be distributed to different income and racial and ethnic groups in the US. We focus on federal education debt, which accounts for approximately 90 percent of all student debt.
Distribution of loan forgiveness by income
We estimate that 66 percent of federal student loan dollars would be forgiven under Warren’s plan. Applying this estimate to the most recent total debt in the federal student loan portfolio ($1.447 trillion) yields a cost estimate of $955 billion dollars. This estimate is higher than the one in the economic analysis (PDF) provided by Warren’s campaign, which used a different methodology.