The next stimulus deal could include student loan forgiveness. Does this mean that there is more and more support for canceling student debt?
Here’s what you need to know.
There has been some confusion about the new stimulus and what it means to your student loans. If there is a new stimulus plan, this may include some student loan discount. However, the latest student debt cancellation proposal is not a large-scale student loan forgiveness. Despite what you may have read, the student loan discount offered would likely be limited in size and scope. Here is the latest update:
1. Republican stimulus proposal: $ 25 billion in student loan debt cancellation
Republicans offered $ 25 billion in student loan cancellation in their latest stimulus proposal to House Speaker Nancy Pelosi (D-CA). However, there are no details on what the student loan forgiveness includes, how it would work, and who would benefit. The latest statistics on student loan debt show that there are 45 million borrowers who collectively owe over $ 1.6 trillion in student loan debt. The proposed $ 25 billion student loan cancellation is not a large-scale plan to write off student debt. Even if you assume 40 million federal student loan borrowers, $ 25 billion is roughly $ 600 for each borrower (assuming each borrower has at least $ 10,000 in federal student loan debt). Therefore, this student loan forgiveness plan would be limited in scope and likely support borrowers affected by Covid-19 or in financial difficulty.
2. Democrats’ stimulus proposal: $ 10,000 student loan cancellation
While the Democrats offered $ 10,000 student loan forgiveness in their latest stimulus proposal (the Heroes Act), it is not a large-scale student loan forgiveness either. House Democrats initially envisioned $ 10,000 in large-scale spending student loan forgiveness, but weakened the measure in the final Heroes Act because of the cost. The current stimulus proposal limits the scope to borrowers who are in financial difficulty. This is a much smaller subsection of the population and they should demonstrate the negative economic impact of Covid-19.
3. There are proposals to cancel student loan debt
That said, there are many proposals from House Democrats, Senate Democrats and presidential candidates to write off student loan debt. For example, Senator Bernie Sanders (I-VT) proposed the most ambitious and large-scale student loan cancellation plan: to cancel the entire $ 1.6 trillion student debt, including student loans private and federal. Senate Democrats have asked for a $ 10,000 student loan forgiveness, while some House Democrats have asked for a $ 30,000 student loan forgiveness. Senator Elizabeth Warren (D-MA) and Senatorial Minority Leader Chuck Schumer (D-NY) proposed to write off up to $ 50,000 in student loan debt. Former Vice President Joe Biden’s proposal is to cancel student loan debt up to $ 10,000 due to the Covid-19 pandemic. However, none of these proposals became law.
4. There is no growing bipartisan support for canceling student loan debt
Student loans can be a bipartisan issue, but there is no growing bipartisan support for canceling student loan debt. Most of the proposals to write off student loan debt outright have come from Democrats, not Republicans. A myriad of laws have been proposed, but no comprehensive student loan debt cancellation proposal has become law. Republicans recognize the scale of student loans as a consumer debt problem, but do not support large-scale plans to cancel student loan debt, citing costs and other concerns. Congress successfully passed the Public Service Loan Forgiveness Program on a bipartisan basis in 2007, which was established under the administration of President George W. Bush. However, this program, which President Trump has proposed to end, is not a full-scale student loan exemption program; it is related to full-time public service or non-profit work and applies to federal student loans.
That said, Republicans joined Democrats on a bipartisan basis in adopting student loan relief. This includes both Senate Republicans and Trump, who spearheaded student loan relief in the Cares Act, the $ 2.2 trillion stimulus package passed by Congress in March. Trump then extended student loan relief for federal student debt until December 31. Many Democrats and Republicans support income-focused repayment plans, which can help provide student loan forgiveness to borrowers after they’ve paid off 20 or 25 years of federal student loans. However, it is also not an outright student loan forgiveness.
Student loan debt impacts millions of Americans. Whatever your stance on student loan cancellation, remember this: Democrats and Republicans can agree on a stimulus deal that includes student loan cancellation in a limited size and scope. However, this is unlikely to be a large-scale student loan forgiveness and should not be seen as growing bipartisan support for student debt cancellation. The reality is that the two sides remain divided over student loan cancellation, and each side believes there are different ways to tackle student debt. Therefore, don’t expect all of your student debt to be canceled in the short term.