Elizabeth Warren just vowed to scrap student loan debt for 42 million Americans

(AP Photo/Nati Harnik)

Sen. Elizabeth Warren, D-Mass, proposed eliminating student debt for millions of Americans.

• Democratic presidential candidate Elizabeth Warren proposed canceling up to $50,000 in student loan debt for 42 million Americans.
• In a blog post, Warren wrote the plan would spur economic stimulus. She would use funds from her Ultra-Millionaire wealth tax to pay for the measure.
• The amount young people owe hit record numbers in 2018, and some economists worry many with student debt will default on their loans.
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In an appeal to younger voters, Democratic presidential candidate Elizabeth Warren has proposed to wipe out student loan debt for good.

Warren, who announced her bid for president in February, proposed canceling up to $50,000 in student loan debt for 42 million Americans. She made the announcement in a blog post published Monday morning. The plan, which she says will wipe out debt for more than 75% of Americans with student loans, will use funds from her Ultra-Millionaire wealth tax - a 2% annual tax for families with more than $50 million. The plan would also spur an economic stimulus, Warren argues, that would increase home buying and create new businesses.

Read more: Apple, Google, and Netflix don't require employees to have 4-year degrees, and this could soon become an industry norm

Warren proposes canceling $50,000 in student loan debt for every person with household income under $100,000, and phases out by $1 for every $3 of cancelation for incomes between $100,000 and $250,000. Warren says her plan to eliminate student debt would cost the government $640 billion.

"We got into this crisis because state governments and the federal government decided that...  they'd rather cut taxes for billionaires and giant corporations and offload the cost of higher education onto students and their families," Warren wrote. "It's time to end that experiment."

The amount young people owe hit a record $1 trillion last year, the highest debt exposure since immediately before the financial crisis. What's worse: despite low unemployment, a significant number of graduates are working low-paying jobs and their wage growth has stalled for years.

Due to the record debt, some economists predict 40% of borrowers to default on student loans by 2023, which could have economic impacts similar to that of the subprime mortgage crisis.

The crisis, as Warren mentions, hits black and brown families harder than white families. Black graduates default at five times the rate of white graduates, and a recent Wall Street Journal report said graduates of historically black colleges have nearly one-third more debt than students at other colleges, and have not paid any debt in the first few years out of school.

After clearing student loan debt, Warren proposes federal and state governments partner to subsidize the entire cost of all public colleges, and invest an additional $100 billion in Pell grants to help pay for non-tuition expenses.

"The enormous student debt burden weighing down our economy isn't the result of laziness or irresponsibility," Warren wrote. "It's the result of a government that has consistently put the interests of the wealthy and well-connected over the interests of working families."