The United States is the first on the ranking of the countries with the highest national debt. And there is no doubt that it has a considerable direct or indirect impact on the citizens and households. Besides that due to the size of student loan debts, the US ranks on the top list of countries. If you are one of those who are struggling with outstanding student loans, then here is some news that you would like to know about. Next year of the upcoming presidential election may concern you at least as a voter (actually it has to concern you especially if you have student loan debt). On the other hand, student debt relief has become a subject that has been generated a lot of heated debates. In this post, we are going to talk about San. Elizabeth Warren’s view on student debt relief and cancellation plan.
Why is student debt relief so significant?
Student debt relief generally means all the conditional and financial options and assistance programs that have been designed in the purpose of helping students to get educational services. Student relief consists of a wide range of distinct programs such as student loan discharge, forgiveness programs, Borrower Defense to Repayment program, Closed School Discharge, etc.
To learn more about different types of student loans, you can have a quick look at the top list of the most popular and active student loan forgiveness programs. In terms of the benefits and opportunities that student loan relief may contribute to the students, student relief programs have utmost significance. It concerns a considerable percentage of the population including household, students, educational service companies, taxpayers, etc. That is why in every period of presidential selections it is one of the main subjects and politics need to exhibit an exact point of view.
To show up the effectiveness of student loan relief, let us assume that one day you wake up and get a message which says your student loan debt balance has been eradicated. Is it dream comes true, isn’t it? But in fact, this could be real actually. How? The answer is student loan forgiveness or discharge. Yes through the forgiveness or discharge programs you can get your outstanding debt balance eliminated, plus you can receive certain refunds and reimbursement at some cases.
Current overview of student loan forgiveness in 2019
As we mentioned earlier, the United States is the leading country in the world with the highest total amount of debt ( in terms of both the national debt and student loan debt). According to the statistic reports released by the US Federal Reserve, the total amount of the student loan debt in the US was $1.6 trillion in 2018. And a number of the students who have taken a student loan has been reaching more than 44 million. On the other hand, 38% of the student loan borrowers have been facing the risk of going default on their loans. Something is going wrong, and the politics and candidates of presidential elections have been concerned about it.
What is the view of Elizabeth Warren about the future of student debt relief plan?
The further presidential elections are upcoming in 2020, and things are getting interesting. Different candidates have their platform which includes the subject of student loan relief also. One of the most popular and ambitious candidates is Sem. Elizabeth Warren who have an entirely different point of view about student loan. Although she has got so many critics due to her platform, Warren has achieved to attract a considerable number of supporter.
When we look through the last few decades, we have seen that obtaining at least bachelor degree has never been so essential in terms of guaranteed life such as high-paid job and social security. However, high-quality educational service is not accessible and affordable for all income-level of people. Thus, at most of the case, it requires the students to take out money through federal and private student loan programs.
On Monday Elizabeth Warren announced on her platform that she is planning to forgive student loan debts of the borrower with amount up to $50000. She argues that ( different from her competitors) this project will be a significant step towards motivating and stimulus of middle-class, enhance the economic growth rate and trigger the development of small-medium businesses.
Even though Elizabeth Warren is challenged by a number of critics by different economists, politics, and media, she has quite several supporters at the same time. For example, one of the leading official institution – Levy Economic Institute has released economic reports about the effects of the forgiving student loan debt on the financial situation.
Their reports say that student debt relief will have positive impacts. Thus, student loan cancellation will lead to an increase in disposable income. So, a household with a higher net worth will be able to trigger purchase which directly or indirectly incentivizes consumption and investment.
Advantages and disadvantages of Elizabeth Warren’s student loan relief plan
If you are a student or you have a massive amount of student loan debt, then, of course, you are going to support Elizabeth Warren’s debt relief plan. On the other, this plan may have some drawbacks along with its advantages. First of all it worth to note that in 22nd April, Elizabeth Warren announced how her debt relief plan would be applied.
One of the difference (an advantage for a specific group) of debt relief plan is that it will work progressively rather than regressive way. So, Elizabeth Warren’s student debt relief plan:
Allows the borrowers to receive student loan cancellation with amount up to $50000, no matter what type of loan (federal or private) is that.
However, this rule applies only if you have an income lower than $100000. On the other hand, if you earn more than $100000, then rules change, the amount of your debt cancellation will decrease $1 for per $3 of your income after the first $100K. (for example, if you earn $140K, you will get $20K student loan cancellation in total).
If your income is much higher than $200K, then, unfortunately, you are not going to receive any forgiveness.
Of course, for the middle-income level of people, this plan may seem quite attractive and reasonable. In terms of increased net worth in disposable income, this means quite a lot of money for saving.
On the other hand, people who earn higher than $200K could not be going to take more benefit from this plan. Or, especially the borrowers who have already paid off their outstanding debts with effort and high sacrifice, this projects seems unfair. From this perspective, maybe Sen. Elizabeth Warren will take into account this side and redesign her debt relief plan again in further months.
By taking all said into account, what stands obviously out from the further scenery is that if Elizabeth Warren wins in 2020 presidential elections, there will be considerable and structural changes at the system of student debt relief. However, we could not say that this may decrease the importance of student loan cancellation programs. And even it seems that there is still a valuable opportunity to take the benefit of student loan forgiveness and discharge right now.