Elizabeth Warren's proposal to cancel $50,000 in student debt would benefit low-income borrowers more, report finds

asheffey@businessinsider.com (Ayelet Sheffey) 

 Provided by Business Insider Senate Majority Leader Chuck Schumer (D-NY) speaks during a press conference about student debt outside the Capitol on February 4, 2021 in Washington, DC. Also pictured, L-R, Rep. Mondaire Jones (D-NY), Rep. Alma Adams (D-NC), Rep. Ilhan Omar (D-MN), Sen. Elizabeth Warren (D-MA) and Rep. Ayanna Pressley (D-MA). Drew Angerer/Getty Images

Critics of student-debt cancellation argue it would benefit high earners the most.
The Roosevelt Institute found cancelling $50,000 in student debt would be progressive, not regressive.
It would also help close the racial wealth gap, given that more Black borrowers graduate with debt.
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Some Democrats' calls to cancel $50,000 in student debt per borrower has critics, with even President Joe Biden arguing it would benefit the high-earners more than the low earners. But a new study challenges that argument.

The left-leaning Roosevelt Institute released a report on Tuesday analyzing the "regressive cancellation myth" that Massachusetts Sen. Elizabeth Warren and Senate Majority Leader Chuck Schumer's plan to cancel $50,000 in student debt per person would be regressive because it helps a well-off group with a college educations. The think tank found that the Warren-Schumer plan is, in fact, progressive, given that wealthy people rarely use loans to pay for college. The plan would also be critical in addressing the racial wealth gap.

"Contrary to common misperceptions, careful analysis of household wealth data shows that student debt cancellation - at all proposed levels - is progressive; it would provide more benefits to those with fewer economic resources and could play a critical role in addressing the racial wealth gap and building the Black middle class," the report said.

The report highlighted five errors people make when saying debt cancellation is regressive:
Including private loans, when debt cancellation proposals have only concerned federal loans;
Only analyzing borrowers, rather than the entire population;
Focusing on distribution of debt by income rather than wealth;
Highlighting the value of debt to the government, rather than to the borrower;
And ignoring the racial distribution of wealth.

According to the report, 61% of students with incomes of $30,000 and under who began college in 2012 graduated with student debt, compared to the only 30% of students with incomes $200,000 and higher who left school with such debt.

The racial wealth gap is a large factor behind advocates pushing for debt cancellation. Last week, the president of the National Association for the Advancement of Colored People (NAACP), Derrick Johnson, said in a statement that the student-loan debt crisis is "a key issue at the core of the racial wealth gap."

Insider also reported in April that 36 civil rights organizations, including the NAACP, were calling on Biden to cancel $50,000 in student debt per person to close the racial and wealth disparities in the country that put borrowers "on the brink of financial devastation."

While many Democrats and advocates want Biden to cancel $50,000 in student debt per person using his executive powers, he has noted his concerns with doing so multiple times, even citing the regressive argument on debt cancellation.

"The idea that you go to Penn and you're paying a total of 70,000 bucks a year and the public should pay for that? I don't agree," Biden said in an interview with The New York Times last month.

He used the same argument that people who go to Ivy league schools do not need student debt forgiveness at a CNN town hall in February, where he said student debt is not a "Harvard, Yale, and Penn" problem.

But Warren, Schumer, and other Democrats continue to argue against this notion. Warren told Insider on Tuesday that Biden can cancel $50,000 in student debt "with the stroke of a pen."

"The time is now," Warren said. "We know what the problem is: student loan debt is holding back tens of millions of people across this country. People who can't buy homes, people who can't buy cars, people who can't start small businesses. We need to cancel that student loan debt, not only for those people individually, but for our whole economy."
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