Student loan wipeout: Bernie says tax Wall Street, erase college debt

On Monday, Rep. Ilhan Omar and Sen. Bernie Sanders introduced a plan that would cancel all student debt as well as eliminate tuition and fees at public four-year institutions and community colleges. | J. Scott Applewhite / AP

Over $1.6 trillion in student loan debt hangs like dead weight on the U.S. economy. Every year, more than 45 million people choose not to do things like buy new homes and cars—activities that would help create jobs and drive growth—because they are burdened with crushing college debts that suck up a huge part of their monthly income. Millions more drop out of college every year without finishing their degrees because it’s just too expensive to continue.

If Sen. Bernie Sanders and some progressive legislators in the House of Representatives have their way, that’s all about to end.

Sanders announced a sweeping proposal Monday to completely wipe out student loan debt for everyone—whether they attended public or private colleges, graduate or undergraduate, no matter their income level.

If implemented, he said the plan would “end the absurdity of sentencing an entire generation, the millennial generation, to a lifetime of debt for the crime of doing the right thing—going out and getting a higher education.”

The elimination of existing student debt is part of Sanders’ comprehensive “college for all” platform, which would see the elimination of tuition at all public colleges and universities. He has also proposed the implementation of subsidies to reduce tuition costs for students at private historically Black colleges and universities.

The independent Senator from Vermont and Democratic presidential candidate elevated the discussion around higher education and its exorbitant costs. His plan is a step up from one proposed earlier by Sen. Elizabeth Warren, who said she would push to eliminate up to $50,000 of student loan debt for individuals earning under $100,000. Those at higher income levels would get limited relief under her plan, with those whose incomes top $250,000 receiving none.

Sanders argued that access to education should be a universal right of everyone. “We will make a full and complete education a human right in America, to which all of our people are entitled.” His plan will have no income restrictions. “I believe in universality,” he said, “and that means if Donald Trump wants to send his kids to a public school, he can do that.”

When reporters questioned why he would include the wealthy, Sanders framed it as a matter of equal access for everyone: “All Americans are entitled to Social Security, are entitled to Medicare, are entitled to education as a right.”

Rep. Ilhan Oman, Minn., who along with Rep. Pamila Jayapal, Wash., accompanied Sanders for the announcement, also added, “The children of Donald Trump aren’t taking out student loans. Canceling student loans is a problem of the poor and middle class, not the rich.”

The legislators were joined by representatives from the American Federation of Teachers, the National Education Association, and Social Security Works.

The student loan debt wipeout would be funded with new taxes on Wall Street speculation. The Sanders campaign said it expects the entire cancelation package to cost approximately $2.2 trillion, and a tax on financial transactions could raise more than $2.4 trillion dollars within ten years to cover it.

The taxes on individual financial transactions would be miniscule, but because of the massive volume of trades, the amount raised could be significant. Every general stock trade would face a 0.5% tax, bonds a 0.1% fee, and derivatives trades an even smaller 0.005% levy.

Sanders pitched the plan as not just a matter of helping people in need, but as an issue of economic justice. He said the nation’s financial class owed a debt to the country which it could now repay with new taxes. Referring to the 2008 financial crash and the Great Recession which followed, Sanders said, “The American people bailed out Wall Street, now it is time for Wall Street to come to the aid of the middle class of this country.”

Further, it would serve as a check on excessive financial speculation by putting a price on trades. Sanders said the plan had the “added benefit of controlling Wall Street recklessness and preventing another major economic crash.”

Sanders’ ideological opponents in the Democratic Party were quick to line up against him. Lanae Erickson, a senior vice president of the think tank Third Way—which Sanders refers to as “the corporate wing of the Democratic Party”—said in a press statement, “I’m not a big fan of debt forgiveness.” Erickson portrayed the elimination of student debt as “a regressive giveaway.”

Representatives of the finance sector criticized the plan as well. Kevin Fromer, CEO of the Financial Services Forum, told The Hill that “a financial transactions tax would be a big mistake.” He claimed that it would reduce savings and increase financial risk.

Sanders’ remarks at the announcement Monday signaled he will have little patience with the claims of Wall Street’s defenders, whether in the Democratic Party or in the lobbying industry.

He reminded those gathered just how one-sided public policy has been in recent years and how much it benefited those at the top:

“Congress voted to bail out the crooks on Wall Street, do you remember that? They provided $700 billion in federal loans in addition to trillions of dollars in zero of very low interest loans. So I think the time is now for Wall Street to repay that obligation to the American people. If we could bail out Wall Street, we sure as hell can reduce student debt in this country.”

Sanders will appear in the first Democratic presidential candidates forum on Thursday night.

A video released by the Sanders campaign to promote his student debt cancellation plan. | Bernie 2020

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CONTRIBUTOR

C.J. Atkins

C.J. Atkins is the managing editor at People's World. He holds a Ph.D. in political science from York University in Toronto and has a research and teaching background in political economy and the politics and ideas of the American left. In addition to his work at People's World, C.J. currently serves as the Deputy Executive Director of ProudPolitics.