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Bernie Sanders proposes forgiving the student debt of 45 million Americans

Key Points
  • Sen. Bernie Sanders announced a plan on Monday to erase the country's $1.6 trillion outstanding student debt.
  • The legislation will release all 45 million Americans from their student debt and be paid for with a new tax on Wall Street transactions.
  • The plan would also make two- and four-year public colleges and universities tuition- and debt-free.
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Bernie Sanders unveils bill to cancel all Americans student loan debt

Sen. Bernie Sanders announced a plan on Monday to erase the country's $1.6 trillion outstanding student loan tab, intensifying the higher education policy debate in the 2020 Democratic presidential primary.

The Democratic presidential candidate's legislation — dubbed "The College for All Act" — will release all 45 million Americans from their student debt and be paid for with a new tax on Wall Street transactions.

The proposal goes further than fellow Democratic candidate Elizabeth Warren's plan, which caps student debt forgiveness at $50,000 and offers no relief to borrowers who earn more than $250,000.

Outstanding education debt in the U.S. has eclipsed credit card and auto debt. Today the average college graduate leaves school $30,000 in the red, up from $10,000 in the 1990s, and 28% of student loan borrowers are in delinquency or default.

Sanders' plan would make two- and four-year public colleges and universities tuition- and debt-free. Trade schools and apprenticeship programs would be tuition-free, as well.

"This is truly a revolutionary proposal," Sanders told The Washington Post. "In a generation hard hit by the Wall Street crash of 2008, it forgives all student debt and ends the absurdity of sentencing an entire generation to a lifetime of debt for the 'crime' of getting a college education."

Sanders is introducing the legislation with Rep. Ilhan Omar, D-Minn., and Rep. Pramila Jayapal, D-Wash., the co-chairwomen of the Congressional Progressive Caucus.

The $2.2 trillion plan would be paid for by a new tax on financial transactions, including a 0.5 percent tax on stock transactions and a 0.1 percent tax on bonds. That levy would raise up to $2.4 trillion over the next decade, according to the senator's office.

U.S. Senator Bernie Sanders (D-VT) seen during the Capitol "Swamp" to unveil college affordability bills, in Washington, DC.
Michael Brochstein | LightRocket | Getty Images

Critics say Sanders and Warren's plan is too expensive and fails to target borrowers who most need relief. The top quarter of American earners hold about a third of the outstanding student debt. "Most borrowers are capable of repaying their student loans," said Mark Kantrowitz, the publisher of SavingForCollege.com.

Proponents say the proposal addresses a debt burden that has ballooned over the last decade and has stunted the financial lives of a generation of Americans.

Recent research has found forgiving student loan debt would raise Gross Domestic Product, add more than one million jobs and increase small business formation and homeownership rates.

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WATCH: Canceling student debt: The costs and benefits of a 2020 plan

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Canceling student debt: The costs and benefits of a 2020 plan