Warren, a Massachusetts Democratic senator, announced her plan to wipe out student debt and public college tuition earlier this week.
"I have some different ideas on this but … she's got something bold, dramatic, she pays for it and she's tackling a core problem," Bair said Wednesday on "The Exchange."
"This debt overhang we have now is a big drag on the economy," Bair added.
Americans owe $1.57 trillion in student debt. Warren claims her plan will cancel at least some of the debt held by 95% of the Americans carrying it.
She proposes eliminating up to $50,000 in student debt for those with household incomes under $100,000, which would cost $1.25 trillion. She would also allow states to make public colleges tuition-free and wants to spend $100 billion on extended Pell Grants to help with nontuition costs.
Warren would pay for it with her wealth tax of 2% on those with a net worth between $50 million and $1 billion. A 3% tax would apply to household net worth above $1 billion.
While some may disagree with the idea of a wealth tax, Bair said at least Warren is trying to fix the problem in a "fiscally responsible way."
She would restructure the system so students don't have any debt. Instead, Bair proposes an income share that would see a financier and student singing a contract that has the student pay a certain percentage of his or her income over a certain period of time, subject to a cap. She has called the percentage "affordable" and said it would only kick in once the now-graduated student has a "decent" income."
— CNBC's Tucker Higgins and Jacob Pramuk contributed to this report.
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