Don’t call him Crazy Bernie — at least in front of student-debt-laden college grads.
Many of them are banking on Democratic presidential candidate Bernie Sanders to honor his pledge to abolish the nation’s $1.7 trillion in student debt by taxing Wall Street.
Sanders, whose prospects as the Democratic nominee are fading, has a controversial bailout proposal that may be responsible for a big share of his support among the 45 million Americans with student loans, political analysts say. And regardless of the November election outcome, the Vermont senator has shifted the political goalposts: The student debt crisis is now a major campaign issue, front and center, these analysts add.
On Friday, in a nod to the financial impact of the coronavirus pandemic on student loan borrowers, President Trump announced a waiver on interest on student loans owed to federal agencies until further notice.
“We are supporters of any programs that reduce student loan debt,” said Michael Bloch, a young businessman who heads the startup Pillar in New York, which helps people manage student loans. He recalls the stress of borrowing for education. Bloch’s wife graduated from law school with over $300,000 in student loans — and he wasn’t too far behind.
“I was staring down the prospect of $250,000 in student loans on top of her loans,” Bloch told The Post. “So I ultimately decided to drop out of business school.”
Sanders’ student relief manifesto is a massive tax and spend giveaway for student loan borrowers like Bloch and his wife, analysts note.
But Sanders’ bold plan has raised a ruckus on Wall Street, and analysts have questioned who would really benefit.
His campaign said the plan will be bankrolled to the tune of $2.4 trillion over 10 years, by a 0.5 percent tax on stock trades, or 50 cents on each $100 of stock; a 0.1 percent charge on bond trades; and a 0.05 percent fee on derivative transactions.
“A decade ago, America committed trillions of dollars to bail out Wall Street banks, whose greed had cratered the economy,” according to Sanders. “Now, it is time to commit a fraction of that to cancel the student debt that is crushing 45 million Americans and dragging down our economy.”
In reality, says Street veteran and industry consultant Bill Harts, the taxes imposed under the plan would be paid by customers. “Sanders’ scheme is actually a tax on the pensions and retirement plans of every single cop, firefighter and teacher in the country,” Harts told The Post. “It’s just a bad idea.”
Harts said it’s the same principle whenever taxes are used for other seemingly well-intended purposes. “When you buy a car, the dealer doesn’t pay the tax, you do,” he said. “When you buy gas, the oil company doesn’t pay the tax, you do. And when your pension plan buys stocks, it sure as heck won’t be Wall Street that pays the tax.”
The Sanders plan could actually exacerbate economic inequality, analysts say.
“The majority of the benefit is for people with the highest amounts of debt, including physicians, lawyers, dentists, and others, as they have the highest salaries,” said Travis Hornsby, CEO at Student Loan Planner. “Those with the smallest balances and who have lower salaries would benefit the least.”
There are other concerns.
“Forgiveness sounds great, but then what about the student who gets a loan the day after the forgiveness?” said Wes Shannon of SJK Financial Planning.
Bloch is not waiting for Sanders to fix the student loan mess. “We realized this was a huge problem for millions of Americans,” explained Bloch, whose Pillar recently launched an app to help users determine the most cost-saving way to pay off loans.
“Student loans are at the forefront of the national conversation and among the political candidates,” he added, “so I am personally excited to see it talked about at the level it is.”