Elizabeth Warren's Higher Education Plan
In April, 2020 presidential candidate Senator Elizabeth Warren (D-MA) unveiled a plan for “universal free public college and cancellation of student loan debt.” The plan would eliminate tuition at public two-year and four-year colleges, expand and increase Pell Grant funding, create a trust fund for Historically Black Colleges and Universities (HBCUs) and Minority Serving Institutions (MSIs), and cancel a large portion of America’s $1.5 trillion in outstanding student loan debt, based partly on income.
Senator Warren has estimated her plan would cost $1.25 trillion over ten years. In order to offset the cost of this and other parts of her agenda, Senator Warren has also proposed a new wealth tax so that her plan will not add to the national debt.
However, some outside estimates suggest Senator Warren’s higher education plan would cost more and the wealth tax would raise less than estimated by the campaign, in which case the tax could fall short of offsetting the entire proposal.
What’s the Plan?
Senator Warren’s higher education plan has four main elements with significant budgetary implications. It would:
- Work with states to eliminate all tuition and fees at public colleges and universities so that every American can attend a public two-year and four-year college for free.
- Increase Pell Grant spending by $100 billion over the next ten years – more than a 25 percent increase – to expand eligibility and help cover non-tuition expenses associated with attending college for low- and middle-income students.
- Create a fund of at least $50 billion for Historically Black Colleges and Universities and Minority Serving Institutions to ensure their spending per student is comparable to other colleges in their area.
- Offer up to $50,000 of loan forgiveness for most individuals, with loan forgiveness phased out with income.
Under Senator Warren’s plan for free public college, the federal government would initially fund two-thirds of the cost – requiring states to cover the final third. Once in place, the federal contribution would grow with inflation.
The proposal would provide tuition reduction to a majority of the 13 million undergraduate students who attend public universities each year, regardless of income, and would likely make college affordable for many more students.
The loan forgiveness element of Senator Warren’s plan would cancel up to $50,000 in student debt for individuals with household income of less than $100,000. All student debt would be eligible for cancelation, including public and private loans for undergraduate or graduate school, covering both tuition and non-tuition expenses. The cancelled debt would not be taxed as income.
In order to target debt cancellation based on income, the maximum amount of debt eligible for cancellation would decrease by $1 for every $3 in income above $100,000 and would phase out completely for households making $250,000 or more. This phase-out would be based on prior-year income to avoid discouraging borrowers from earning or reporting income.
An analysis from the Urban Institute found that the average borrower would receive roughly $22,000 of loan relief. Just over half of that loan forgiveness would go to households in the third and fourth income quintiles, earning between $41,000 and $109,000 per year. Another third would go to households in the bottom two quintiles making less than $40,000, and the remaining sixth would go to households in the top quintile making over $110,000 per year.
Senator Warren’s plan would also ban for-profit colleges from receiving any federal funding, require public colleges to complete an annual audit identifying issues creating shortfalls in enrollment of low-income and minority students and proposing steps to close those shortfalls, and ban public colleges from considering citizenship status or criminal history in admissions decisions.
How Much Would the Plan Cost?
The Warren campaign estimates her higher education plan would cost the federal government $1.25 trillion over ten years.
Over half of the cost would go towards student debt cancelation, which research cited by the campaign indicates would cost roughly $640 billion over ten years. Another $150 billion is specifically designated in the plan for the HBCU/MSI trust fund ($50 billion) and Pell Grant expansion ($100 billion). We assume the remaining $460 billion represents the cost of eliminating tuition at all public two-year and four-year colleges.
|Proposal||Campaign Estimate||Higher-End Estimate|
|Eliminate Tuition at Public Two-Year and Four-Year Colleges||$460 Billion||$700 Billion|
|Expand Pell Grant System||$100 Billion||$100 Billion|
|Create Trust Fund for HBCUs/MSIs||$50 Billion||$100 Billion|
|Student Loan Debt Forgiveness||$640 Billion||$1 Trillion|
|Spending Sub-Total||$1.25 Trillion||$1.9 Trillion|
|Ultra-Millionaire Tax||-$2.75 Trillion||-$1.1 Trillion|
Source: Warren Campaign, Urban Institute, Emmanuel Saez and Gabriel Zucman, CRFB Calculations.
While we have not formally estimated Senator Warren’s higher education plan, it is important to note that the actual cost could be higher than the campaign estimates – perhaps as high as $1.9 trillion.
Using the same data as the campaign’s researchers but a different methodology, the Urban Institute recently estimated that Senator Warren’s plan would forgive $955 billion of debt. Since in many cases loan repayment is expected to exceed the cost of issuing loans, that could mean a cost as high as $1 trillion.
Depending on the details, free public college could also end up costing more than $460 billion over a decade. Updating our 2016 estimate of Senator Sanders’s plan would put the cost at about $700 billion. Finally, the $50 billion for HBCUs and MSIs is a floor, not a ceiling, so the cost could be higher.
Would the Plan be Paid-For, and How?
To pay for her college affordability plan, Senator Warren has proposed instituting an “ultra-millionaire tax” – or wealth tax – which would levy a 2 percent tax on a household’s assets valued at $50 million or more and a 3 percent tax on household assets valued at $1 billion or more. According to an estimate by Emmanuel Saez and Gabriel Zucman provided by the campaign, the tax would raise $2.75 trillion in additional revenue over ten years.
Though $2.75 trillion would more than cover the cost of Senator Warren’s higher education plan, the campaign has proposed using the remaining revenue for other purposes, including universal child care.
In the coming weeks and months, we will publish a full policy explainer on Senator Warren’s wealth tax. For now, it is worth noting that some outside experts have questioned whether it would actually raise $2.75 trillion. Larry Summers and Natasha Sarin, for example, have argued that wealthy households subject to the tax would engage in a much greater degree of tax avoidance than the 15 percent avoidance assumed by Saez and Zucman. Summers and Sarin argue that "even being maximally optimistic...we still get a revenue estimate for wealth taxation of only about $75 billion [per year], or approximately 40 percent of the Saez and Zucman estimate." Forty percent would translate to roughly $1.1 trillion over a decade. Saez and Zucman have written a rebuttal, to which Summers and Sarin have responded.
We have not yet identified nor been able to generate a reliable estimate for how much a wealth tax would raise under traditional scoring. Because Senator Warren’s wealth tax would be used to finance multiple policies, we are also unable to identify what portion of the wealth tax would fund Senator Warren’s higher education plan.
For these reasons, we cannot yet determine whether Senator Warren’s higher education plan would be fully paid-for as intended – though the intent to offset the plan is clear.
Where Can I Learn More?
- Senator Warren’s College Affordability Proposal
- Senator Warren’s Wealth Tax Proposal
- Emmanuel Saez and Gabriel Zucman: Estimate of Potential Revenue from Wealth Tax
- Campaign: Analysis of Warren Student Debt Forgiveness Proposal
- Urban Institute: Who Would Benefit from Elizabeth Warren’s Student Loan Forgiveness Proposal?
- Brookings Institute: How Progressive is Senator Elizabeth Warren’s Loan Forgiveness Proposal?
- David Gamage: Five Key Research Findings on Wealth Taxation for the Super Rich
- Tax Foundation: Sen. Warren’s Wealth Tax Is Problematic
- Tax Policy Center: Warren’s Wealth Tax Revenue May Not Meet Expectations
- Institute on Taxation and Economic Policy: The U.S. Needs a Federal Wealth Tax
- Demos: It’s Time to Take Student Debt Cancellation and Debt Free College Seriously
- American Enterprise Institute: Warren shows we’re already forgiving too much student debt
- Brookings: Lessons from Chile’s Transition to Free College
- Washington Post: A ‘wealth tax’ presents a revenue estimation puzzle (initial Summers and Sarin piece)
- Saez and Zucman: Response to Summers and Sarin, “A wealth tax presents a revenue estimation puzzle,” Washington Post, April 4 (rebuttal to Summers and Sarin piece)
- Washington Post: Be very skeptical about how much revenue Elizabeth Warren’s wealth tax could generate (rebuttal to rebuttal to Summers and Sarin piece)
- New York Times: Canceling Student Loan Debt Doesn’t Make Problems Disappear
- Washington Post: Warren’s free-college-and-debt-forgiveness plan may be liberal, but it isn’t progressive
- Los Angeles Times: Elizabeth Warren’s college debt plan helps the middle class — and does much more
- Slate: Elizabeth Warren’s Student Loan Forgiveness Plan Mostly Helps the Middle Class, Think Tank Finds
- CRFB: Clinton’s College Affordability Proposal, Explained
- Saez and Zucman: Progressive Wealth Taxation
With the 2020 campaign now in full gear, the presidential candidates are putting forward many ambitious proposals aimed at solving very real problems and concerns. The voting public deserves to know how much these proposals will cost, and what it means for the debt we will be leaving to our children and grandchildren.
This policy explainer is part of our US Budget Watch series covering the 2020 presidential election. In the coming weeks and months, we will continue to publish analyses of candidate proposals that are having the greatest impact on the debate over our nation’s future. You can read more of our policy explainers and factchecks here.