Bernie Sanders will unveil a plan to cancel all $1.6tn (£1.3tn) of US student debt by introducing a new tax on Wall Street speculation.
The Democratic presidential candidate is proposing federal government pays to wipe clean the student debt held by 45 million Americans including all private and graduate school debt.
It comes as part of a package that also would make public universities, community colleges and trade schools tuition-free.
Mr Sanders is proposing to pay for these plans with a tax on Wall Street his campaign says will raise more than $2tn over 10 years, though some tax experts give lower revenue estimates.
The Vermont senator will propose the legislation alongside Democratic congresswoman Ilhan Omar who will introduce legislation in the House to eliminate all student debt in the United States. as well as Democratic congresswoman Pramila Jayapal, the co-chairwoman of the Congressional Progressive Caucus, who has championed legislation to make public universities tuition-free.
Mr Sanders helped popularise demands for tuition-free college during his 2016 presidential campaign run but did less to emphasise solutions for those who had already left school saddled with debt.
Since then, liberal Democratic lawmakers have called for increasingly aggressive government solutions for erasing existing student debt. Congresswoman Elizabeth Warren has proposed $640bn in student debt relief while former housing secretary Julian Castro is introducing a more modest debt forgiveness plan.
Those proposals have faced fierce objections, including from some moderate Democrats, for giving taxpayer subsidies to educated Americans. On average, this group have higher earnings than compared to those with only a high school degree.
Advocates say the push reflects the growing recognition of the economic harm created by the nation’s soaring student debt burden, particularly on the millennial generation, which ballooned from $90bn to $1.6tn in about two decades, according to federal data.
“This is truly a revolutionary proposal,” said Mr Sanders, who is announcing the plan with the support of congresswoman Alexandria Ocasio-Cortez and a handful of other House Democrats.
“In a generation hard hit by the Wall Street crash of 2008, it forgives all student debt and ends the absurdity of sentencing an entire generation to a lifetime of debt for the ‘crime’ of getting a college education.”
Mr Sanders is proposing to pay for the legislation with a new tax on financial transactions, including a 0.5 per cent tax on stock transactions and a 0.1 per cent tax on bonds. Such a levy would curb Wall Street speculation while reducing income inequality, according to a report by the Century Foundation, a left-leaning think tank. But conservatives warn it would stunt economic growth and investment.
Conservatives and moderate Democrats are likely to raise concerns about any student debt forgiveness plans. They have pointed out that Democratic presidential candidates, including Mr Sanders, have pushed more than a dozen expensive federal projects – including Medicare-for-all, the Green New Deal and large infrastructure improvements – projected to cost substantially more than the $1.5tn Republican tax law approved in 2017, at a time of already high deficits.
“The cost will march towards $3tn and benefit a lot of wealthy families and future high-earners,” said Brian Riedl, an analyst at the Manhattan Institute, a libertarian-leaning think tank. “Of all problems requiring a $3tn federal expenditure, the college costs of middle and upper-class college graduates seem lower-priority.”
A fierce debate has raged in left-leaning policy circles as well over whether cancelling student debt offers too much help to families with higher incomes. The top 40 per cent of earners would receive about two-thirds of the benefits from Ms Warren’s plan, according to Adam Looney, a former Treasury official under president Barack Obama who is now at centre-left think tank the Brookings Institution
That number is likely to be higher under Mr Sanders’ plan, given that proposals by Ms Warren and Mr Castro do not call for wiping clean the debt of those earning over six figures.
Ms Warren has proposed forgiving up to $50,000 in student debt for those earning under $100,000, or about 42 million people. Under Mr Castro’s plan, borrowers would not have to repay their loans until their income rose above 250 per cent of the federal poverty line – about $64,000 for a family of four – after which it would be capped.
Sara Goldrick-Rab, a professor at Temple University who specialises in higher-education financing, said she had mixed feelings about plans such as the one proposed by Mr Sanders that involve forgiving all student debt.
“There’s a piece of me that has seen how widespread the pain is, including among people you might say are financially fine,” Ms Goldrick-Rab said. “But there’s a piece of me that knows what the pot looks like, and says, ‘That’s not the best use of the money.’ “
Other experts say these criticisms miss the mark. If the plans are paid for with higher taxes on affluent Americans, they will ultimately redistribute resources down the income distribution, said Marshall Steinbaum, a former researcher at the Roosevelt Institute who was recently hired as an economics professor at the University of Utah.
Student debt forgiveness would also help stimulate economic growth by freeing borrowers to buy homes and improve their credit, while primarily benefiting racial minorities, according to Mr Steinbaum and researchers at the Levy Institute, a left-leaning think tank.
Ms Omar, who has student debt, said in a statement that the plan would “unleash billions of dollars in economic growth”.
Additionally, poorer Americans would see the percentage of their income held in debt fall much more dramatically than that of higher earners under the plan, Ms Steinbaum said. Ms Steinbaum has also disputed Mr Looney’s analysis, arguing that it ignores people who have so much debt that they cannot pay it off.
The difference in these plans may reflect a wider debate in the Democratic Party over how to tailor government programmes.
Mr Sanders has proposed universal government programmes whose benefits also go to the rich and do not depend on recipients’ earnings. Mr Sanders’s Medicare-for-all plan, for instance, would offer government health insurance to every American regardless of income, a break from Mr Obama’s Affordable Care Act, which aimed to expand insurance primarily to low-income individuals.
Supporters say making government programmes also available to the affluent makes them more politically durable, citing the popularity of programmes such as libraries and K-12 public education. But critics say such programmes offer help to those who do not need it.
Ms Warren, for instance, has proposed a plan that would make child care free only for those earning up to $51,200, in the case of a family of four.
Her approach also makes her plans much less likely to require tax hikes on middle-class Americans. She has said she can pay for these programmes with tax hikes on people with more than $50m and on corporations with more than $100 million in profits. Mr Sanders has embraced higher taxes on the middle class, saying families will benefit overall by seeing other expenses reduced.
Critics are likely to say Mr Sanders’ plans reflect his attempts to distinguish himself from Ms Warren, who has risen in the polls during the past several months of the Democratic primary. She has sometimes overtaken Mr Sanders’ second position in polling behind former vice president Joe Biden.
Ms Warren’s student loan plan would entirely clear student debt for more than 75 per cent of borrowers. She also has embraced some universal plans, co-sponsoring Mr Sanders’s single-payer legislation.
Like Mr Sanders, Ms Warren has crusaded against rising income inequality and released detailed proposals for taking on Wall Street and expanding government programmes.
Mr Sanders’ higher-education plan may reflect other ways he is attempting to stake out the left flank of the primary. For instance, his previous free-college-tuition plan in Congress would eliminate tuition and fees only at four-year public colleges for those making up to $125,000, the result of a compromise he reached with Hillary Clinton after the 2016 presidential campaign.
Mr Sanders previously campaigned on free college tuition, regardless of income, in 2016.
His new plan goes further, calling for public four-year colleges and community colleges to be free for everyone, including tuition and fees. Mr Sanders’ bill includes $1.3bn a year for low-income students at historically black colleges and universities, and $48bn per year for eliminating tuition and fees at public schools and universities.Jeremy Hunt: Boris Johnson is a ‘coward’ for avoiding debate