The progressive way to ease student debt burdens

The progressive way to ease student debt burdens
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Sens. Elizabeth WarrenElizabeth WarrenThe Trojan Horse of protectionism Federal Reserve officials' stock trading sparks ethics review Manchin keeps Washington guessing on what he wants MORE (D-Mass.) and Chuck SchumerChuck SchumerBiden discusses agenda with Schumer, Pelosi ahead of pivotal week CEOs urge Congress to raise debt limit or risk 'avoidable crisis' If .5 trillion 'infrastructure' bill fails, it's bye-bye for an increasingly unpopular Biden MORE (D-N.Y.) want to give up to $50,000 in debt relief to every American with student loans. Though they claim to be progressives, there is nothing progressive about this. It would benefit households in the top half of the income scale far more than those in the bottom half. Almost half of those with student debt have graduate degrees, after all.

It’s no wonder so many working-class voters have abandoned the Democratic Party. Bailing out college graduates with decent incomes will convince many that the Republicans are correct: The Democrats are elitists who don’t care about those without college degrees.

President BidenJoe BidenCapitol fencing starts coming down after 'Justice for J6' rally Senate parliamentarian nixes Democrats' immigration plan Biden pushes back at Democrats on taxes MORE proposes to forgive only $10,000 in student debt, targeted to borrowers from low-income families. That is a more progressive approach, but it won’t help those who never went to college. According to the Census Bureau, only roughly 36 percent of Americans over age 25 have four-year college degrees, while 38 percent never attended a day of college. Only 20 percent of U.S. households have student debt.


With a little creativity, the president could help needy borrowers while also investing in non-college goers. Specifically, the administration should propose $10,000 per person in “career opportunity accounts” for working Americans aged 18 to 55 who earn less than $75,000 a year. Roughly two-thirds of all full-time, year-round workers earn less than $75,000. (To avoid penalizing those who earn just over $75,000, the money could be phased out between $70,000 and $80,000.)

Those with student debt could use their accounts to pay it off, but the rest could use them for education, training, apprenticeships and the like, to acquire the skills they need to earn a decent living. They could do so at any point in the future, until they turn 56.

Is $10,000 enough? Well, it would eliminate all student loans for 37 percent of borrowers (16.3 million people) and cut in half debts owed by another 20 percent (9.3 million). It would take care of most who default on their payments – those least likely to have completed a four-year degree – because they owe an average of $9,625.

For those with no student loans, a career opportunity account could create a real ladder into the middle class.

These accounts would be somewhat like individual retirement accounts (IRAs). As with IRAs, account holders could invest their own money, which would accumulate tax-free. We could even extend that right to those who earn too much and thus get no access to federal money.


To access their funds, people would have to visit an American Job Center (called different things in different states) and talk with a career counselor. By telling people which education and training providers lead to decent jobs at good wages, counselors could help them avoid scams. Most of this information already exists on two federal websites, although the administration would need to invest in making it more comprehensive. 

According to Census Bureau data, roughly 85 million people would qualify for career opportunity accounts, a number that would grow a bit each year as a new crop turned 18. At $10,000 per person, it would cost $850 billion to $900 billion over the first decade. But while most student loan repayment would occur in the first year, that would amount to only $250 billion to $300 billion. The rest would be spread over quite a few years, because not everyone would access their accounts right away. Some might never access them — a savings perhaps balanced by the small cost of the tax incentive.

Overall, I estimate that career opportunity accounts would cost about $350 billion in the first year and roughly $50 billion a year for the following decade. Some of the 47 federal workforce programs, which now cost roughly $19 billion a year, could be folded in, reducing the overall price tag.

The payoff would be enormous. The immediate debt relief would allow some to spend more, boosting the economy a bit. But the long-run increase in workforce skills would raise productivity, decrease unemployment and generate growth.

Finally, President Biden and Democrats would reap huge political gains. Imagine sending a career opportunity card worth $10,000 to 85 million Americans aged 18 to 55. The contrast with Trump’s tax cut, most of which went to corporations and people making over $75,000 a year, would be red meat for Democratic candidates.

David Osborne, author of “Reinventing Government and Reinventing America’s Schools: Creating a 21st Century Education System,” directs the K-12 education work of the Progressive Policy Institute.