Yahoo Finance Bernie Sanders’ plan to abolish $2.3 trillion in student debt
US senator Bernie Sanders has announced a plan to completely wipe all Americans’ student debt.
The ambitious plan would wipe US$1.6 trillion (AU$2.3 trillion) of debt but would cost US$2.2 trillion. It would be paid for with a tax on Wall Street speculation and would release around 45 million people from student debt, without any eligibility tests or requirement.
“This proposal completely eliminates student debt in this country and ends the absurdity of sentencing an entire generation, the millennial generation, to a lifetime of debt for the crime of doing the right thing -- and that is going out and getting a higher education," Sanders said in Washington.
"The bottom line is we shouldn't be punishing people for getting to higher education.
"It is time to hit the reset button. Under the proposal that we introduced today, all student debt would be canceled in six months."
In a statement posted on Twitter, Sanders said it came down to his belief that every person regardless of income, race or disability should be able to receive a tertiary education.
I've been criticized for this, so let me say it again.
Every young person, regardless of their family income, the color of their skin, disability, or immigration status should have the opportunity to attend college.#CollegeForAll #CancelStudentDebt— Bernie Sanders (@BernieSanders) June 24, 2019
Democratic primary rival, Senator Elizabeth Warren, proposed a similar package but which imposed some income eligibility levels to determine how much relief was granted.
Both proposals come just weeks after billionaire technology investor Robert F. Smith pledged to pay off the US$40 million debt accrued by the 400-strong graduating class at historically all-male black college, Morehouse College.
"On behalf of the eight generations of my family that have been in this country, we're gonna put a little fuel in your bus," Smith told the graduates.
"This is my class, 2019. And my family is making a grant to eliminate their student loans."
Right after @RFS_Vista tells the Class of 2019 he will cover their student loans #MorehouseGrad2019 #MVP @Morehouse pic.twitter.com/wMD1DfOTfT
— José Mallabo (@JoseMallabo) May 19, 2019
While applauded on social media, Smith’s move also raised the prominence of student debt in America.
New York congresswoman Alexandria Ocasio-Cortez said Smith’s actions were laudable, but: “It’s important to note that people shouldn’t be in a situation where they depend on a stranger’s enormous act of charity for this kind of liberation to begin with (aka college should be affordable), but it is an incredible act of community investment in this system as it is.”
Former US President Barack Obama said: “While we’ve still got a lot of work to do to make college affordable for everyone, that didn’t stop Robert F. Smith from seizing an opportunity to make a difference.”
Australians with university debt receive new repayment thresholds
Sanders' move comes days before the end of financial year in Australia. For Australia’s university graduates, 1 July might mean paying off their debt earlier.
The HECS repayment threshold will decrease to $45,881 before tax, and comes after another drop in the repayment threshold to $51,957 last year from $55,814, meaning the income levels at which graduates are expected to begin paying off their debt has fallen by around $10,000 in two years.
“This is shameful by the ATO,” one person commented on Twitter.
“You could be working full time in a retail job and meet this HECS debt threshold. The government should be asking why degree holders aren’t meeting the threshold, not lowering it.”
However, research by the Grattan Institute found the reduction in the threshold is unlikely to cause major financial pain as affected taxpayers are required to only meet the 1 per cent repayment rate, and may also live in households where the total income is significantly higher.
The Australian government is currently owed $55 billion in higher education debt, and expect to write off at least $20 billion of that.
Documents obtained by the ABC revealed the Federal Government also considered recovering unpaid student debts held by deceased people, but ultimately rejected the $46 million proposal.
Make your money work with Yahoo Finance’s daily newsletter. Sign up here and stay on top of the latest money, news and tech news.
