Sen. Elizabeth Warren at SXSW. (Photo: Callaghan O'Hare/Bloomberg) Sen. Elizabeth Warren at SXSW. (Photo: Callaghan O’Hare/Bloomberg)

As they promised a little over a month ago, Sen. Elizabeth Warren, D-Mass., and House Majority Whip James E. Clyburn, D-S.C., have introduced legislation in the Senate and House to eliminate up to $50,000 in student loan debt for 42 million Americans.

(Related: Warren Bill to Forgive Student Loan Debt Coming Soon)

The Student Debt Relief Act would cancel student loans of 75% of student loan borrowers and provide debt relief for 95% overall.

“My very first bill when I got to the Senate was legislation to tackle the growing student debt crisis because I was sick of Washington allowing the wealthy to pay less, while burying tens of millions of Americans in mountains of student loan debt,” Warren said at a press conference in the Senate Dirksen building. “Since then, Washington has only allowed this crisis to get worse — especially for people of color. Enough is enough.”

“Post-secondary education should be the springboard to enable students to achieve their dreams not the impediment that prevents the realization of those goals,” Clyburn said.

Outstanding student loan debt has exploded to $1.5 trillion, affecting almost 45 million Americans, including nearly 7.2 million in default. The average African American student loan borrower owes more money 12 years after graduation than they did at graduation, said Warren.

She stressed that student loan debt is a problem not just for borrowers but for the U.S. economy as a whole because borrowers aren’t able to purchase a home, start a new business or engage in other activities that would boost economic activity. Student loan debt is a “drag on our entire economy; finding ways to cancel a big chunk of it meaning freeing up money to do more, buy more,” said Warren.

The bill would:

  • Cancel a maximum $50,000 of debt for borrowers with an adjusted gross household income of less than $100,000
  • Reduces $1 of debt for every $3 in income above $100,000 for borrowers with an annual AGI up to $250,000
  • Cancels these loans: federal family education loans, federal direct and Indirect student loans, Parent and Grad PLUS Loans and Federal Perkins Loans Direct and Indirect Student Loans
  • Excludes amount of student loans canceled from taxable income
  • Allows for cancellation of private student loans through the refinancing program in Title II
  • Allows for refinancing of federal student loans to lower interest rates

The legislation would only affect those borrowers with existing student loan debt. A separate proposal to tuition-free public college would help reduce the amount of new student debt, along with expanded Pell grants, said Warren noting that “all these pieces fit together.”

Warren said she would finance her student debt forgiveness, free public college tuition, universal child care and pre-K with her proposed 2% wealth tax on Americans with a net worth exceeding $50 million, which would raise $2.75 trillion over 10 years.

— Check out Richest in US Have a Few Tricks to Avoid Democrats’ Tax Plans on ThinkAdvisor.