How the college debt debate shifted with one big idea

Her latest -- a proposal that according to her campaign's analysis would forgive $640 billion in student loans currently held by the government and make tuition largely free for public two- and four-year institutions -- would seek to address inequality, break down financial barriers to a college education and ease the debt burden on those who already went to school. The Massachusetts Democrat would finance it all with a tax on income over $50 million. That's also how she's pay for her universal pre-K proposal.

It would totally wipe away more than three-quarters of student loan balances in the country, according to an analysis by academics published on Warren's website.

There are other candidates for the Democratic nomination with plans to make college more affordable. Cory Booker would give every child a nest egg, funding those of lower-income children at a higher level, and Bernie Sanders has previously proposed a tuition subsidy program.

But Warren's proposal commanded new interest in the topic, although passing something of this magnitude in the Senate seems unlikely; Majority Leader Mitch McConnell, a Kentucky Republican, has vowed to be a "grim reaper" for progressive plans.

Warren's proposal drew praise but also swift backlash on social media, where some wondered whether it was fair to help current and future borrowers when many other people have already paid off their loans with no such assistance.

But it is certainly in line with a new wave of Democratic proposals that seek to drastically change what the government provides to Americans.

Is this a crisis?

There is bipartisan agreement that something must be done about student loans, although for different reasons. Americans now hold more debt in student loans than in either auto loans or credit cards. Unlike credit cards or auto loans, however, a college education pays back with future earnings.

Warren sees a crisis in student loans because they bear down on borrowers, perhaps for decades after they finish school. She's said that under her administration, student loan debt, along with climate change and gun violence, would be considered a national emergency. Conservatives like Secretary of Education Betsy DeVos have called the state of student loans a crisis because they represent such a large portion of the US balance sheet.

The federal government basically took over the student loan industry in 2010, when it became the lender for federally guaranteed student loans. It currently holds more than $1 trillion in student debt. In fact, student loan debt is the federal government's largest single asset, according to the Treasury Department's annual report.

But it is not making a ton on that investment, according to several reports from the Government Accountability Office and the Congressional Budget Office, especially since students can now tie loan repayment to income and lengthen the terms of their loans.

More people borrowing more money

Student debt has become a topic of national concern in a very short time.

A New York Federal Reserve Bank study on household debt released in March found that student debt represented a larger piece of Americans' personal balance sheets than credit cards or auto loans. It's still dwarfed by home loans, but more people are borrowing for college, they're borrowing more money and they're taking longer to pay it off, according to the report. The number of borrowers climbed from 2.5 million to more than 4 million between 2005 and 2015 and the average amount borrowed grew from $20,000 to nearly $35,000.

The growth in borrowing was compounded by the Great Recession, when many out-of-work Americans went back to school.

More debt is changing the way Americans live

A separate report by the Fed, which was published in January and cited by Warren when she announced her plan, argued there is a direct correlation between a drop in homeownership among younger Americans after the Great Recession and a rise in student debt.

That was also the time when strapped states slashed funding for state-funded colleges and universities. Most states have not returned to pre-recession spending on higher education, according to the Center on Budget and Policy Priorities, a progressive think tank. This lack of government funding and rising costs have been passed on to students.

"The position of the federal government has been, 'Good luck to you, you're on your own,' " Warren said Monday at a CNN town hall. "The one thing they've done is they've lent tens of thousands, hundreds of thousands, millions, billions of dollars to our students. And it is now crushing them. So my proposal is to say ... this isn't right."

Who borrows the money?

Student loans are felt disproportionately in minority communities and among low-income Americans. According to the Center on Budget and Policy Priorities report, in data cited from 2012, more than three-fourths of students from the bottom quarter in income had student loans, versus a little more than half of students from the top quarter of families income-wise. More than 80% of African American students graduating from public institutions had loans, far more than the 64% of total students.

First-generation students are more likely to fall behind on payments, according to the Fed in 2016 -- 11%, compared with 5% of people whose parents went to college. Just 5% of white students who take loans for their own education will fall behind, compared with 14% of African American students and 27% of Latino students.

More moderate Democrats running for president were not leaping up behind Warren on her proposal, but they were acknowledging the need to do something differently.

Sen. Amy Klobuchar of Minnesota opposes a free tuition program like Warren's, but she said Monday night at her own CNN town hall that "I actually want to get something done when it comes to student loans," so she would allow people to refinance their loans to around 3% interest, less than the government has charged in recent years.

South Bend, Indiana, Mayor Pete Buttigieg said he is still doing the math.

The counterargument

Not everyone agrees there is a crippling student loan crisis in the same stark terms as Warren.

"My primary objection to what Warren proposed is it's spending a lot of tax dollars for people who probably don't need it," said Beth Akers, a senior fellow at the Manhattan Institute, a think tank that promotes free market ideas. She argued that even with Warren's proposed cap of $250,000 for any sort of loan forgiveness, the plan would be giving a lot to people are paying off their loans just fine.

Clearly there are people who will need help repaying their loans, but the government already has those systems in place, she said.

"A lot of times we're talking about the Warren plan relative to this imaginary status quo where students' loans are crushing, inescapable things, when in reality we actually have a very robust safety net for borrowers that ties payments to their incomes and makes them eligible for forgiveness if they have low income over an extended period of time," she said.

DeVos has proposed cutting elements of those programs in every year of the Trump administration.

Graphics by CNN's JoElla Carman.

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