How Elizabeth Warren's student loan relief plan affects the wealthy

A new study analyzing the Democratic presidential candidate's 2020 plan, Warren – who forgives up to US $ 50,000 and cuts relief for high-income Americans – could partly alleviate concerns about a boon for the wealthiest Americans. The most-analyzed US income group, those earning more than $ 110,000, draws a lot of help from the senator's action: it would cancel an average debt of about $ 19,000 for these borrowers and 53% of them would get total cancellation of their loan, according to a study from the Urban Institute released Thursday.

But the Massachusetts Democrat proposal would wipe out student debt of more than 80 percent of loan holders in each of the four low-income groups assessed in the study. They would all see a higher average pardon than the biggest employees.

The phasing out of benefits for high-income student debt holders "reduces" the benefits for high taxpayers relative to low-income borrowers, said Matthew Chingos, vice president of data and policy Education at the Urban Institute. Chingos had previously told CNBC that it might be difficult for Democrats to oppose the Republican tax cuts that benefit the richest Americans the most they also supported a plan. widespread debt relief that boosts high-income Americans.

Nevertheless, in gross dollars, Warren's plan would be the most beneficial for student loan holders earning between $ 65,000 and $ 109,000 – largely because more people in this group would take on debt to borrow higher education and borrow more. Chingos said, "There is always this concentration of benefits in middle and upper income groups."

Warren announced Monday its student debt relief plan, adding to the list of proposals it has made to dramatically reorganize the US economy. The senator, who has long called for a policy aimed at keeping big business and the wealthiest Americans at bay, wanted to pretend to be one of the most populist voices in the Democratic primary.

The Conservatives have criticized the potential cost of Warren 's proposal on student debt and asked if it would be an effective use of money. Lindsey Burke, of the Heritage Foundation, asserted that it would result in an "exorbitant cost to taxpayers" and "would not achieve the goal of greater equality." access to education ".

Warren's debt measure would cancel up to $ 50,000 in loans for people with incomes under $ 100,000. As incomes rise, borrowers will benefit from less respite. At the $ 250,000 level – or the top 5% – forgiveness would be totally cut off.

His campaign called the measure of student loans a gradual way to boost the economy and consumer spending, largely because a tax on wealthier US families would fund debt relief.

"This is a very progressive proposal.We tax the fate of people with more than $ 50 million worth of wealth to cancel the debt of 42 million low-income Americans and students." to the middle class, "said a Warren employee. The senator's campaign also highlighted an analysis showing that the proposal would help reduce the racial wealth gap.

According to the Urban Institute, debt relief for black borrowers would represent 25% of total rebates, while only 16% of US households are black. Holders of white loans would benefit about 59 percent from relief, while white households would account for 68 percent of the total in the United States, according to the study.

The effect would be less pronounced for Hispanic borrowers. They would see about 10% of the total dollars forgiven and would represent 11% of households.

Overall, people with incomes between $ 65,000 and $ 109,000 would benefit from about 28% of the total rebate, followed by those between $ 40,000 and $ 65,000, which would benefit from a quarter of the total. debt relief. People earning less than $ 22,000 would benefit from 14% of loan relief, in part because they have lower average debt than high income groups.

According to the study of the Urban Institute, Warren's proposal would cost $ 955 billion. The assessment of the plan by the left political might be partly related to the question of whether voters think that lightening loans is the best possible use of $ 1 trillion, Chingos said.

He noted that voters in the Democratic primary could decide to receive a deposit of "Medicare for All", for example, with the same money.

Warren has already proposed using wealth tax revenues to fund universal child care, another plan that she says will boost the US economy.

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