Student Loan Forgiveness In Next Stimulus? It Doesn’t Mean There’s Growing Support To Cancel Student Loan Debt

The next stimulus deal could include student loan forgiveness. Does this mean there’s growing support to cancel student loan debt?

Here’s what you need to know.

Student Loans

There has been some confusion about the new stimulus and what it means for your student loans. If there is a new stimulus package, it may include some amount of student loan forgiveness. However, the latest proposal to cancel student loan debt is not wide-scale student loan forgiveness. Despite what you may have read, the proposed student loan forgiveness likely would be limited in size and scope. Here is the latest update:

1. Republican stimulus proposal: $25 billion of student loan debt forgiveness

Republicans proposed $25 billion of student loan forgiveness in their latest stimulus proposal to Speaker of the House Nancy Pelosi (D-CA). However, there is no detail on what the student loan forgiveness includes, how it would work and who would benefit. The latest student loan debt statistics show that there are 45 million borrowers who collectively owe more than $1.6 trillion of student loan debt. The $25 billion proposed student loan forgiveness is not a wide-scale plan to cancel student loan debt. Even if you assume 40 million federal student loan borrowers, $25 billion amounts to roughly $600 for each borrower (assuming hypothetically each borrower has at least $10,000 of federal student loan debt). Therefore, this student loan forgiveness plan would be limited in scope and likely support borrowers impacted by Covid-19 or otherwise struggling financially.

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2. Democrats stimulus proposal: $10,000 of student loan forgiveness

While Democrats proposed $10,000 of student loan forgiveness in their latest stimulus proposal (the Heroes Act), this too is not wide-scale student loan forgiveness. House Democrats initially considered $10,000 of wide-scale student loan forgiveness, but weakened the measure in the final Heroes Act due to cost. The current stimulus proposal limits the scope to borrowers who are struggling financially. This is a much smaller sub-section of the population and they would need to demonstrate adverse economic impact from Covid-19.

3. There are proposals to cancel student loan debt

That said, there are multiple proposals from House Democrats, Senate Democrats and presidential candidates to cancel student loan debt. For example, Sen. Bernie Sanders (I-VT) proposed the most ambitious, wide-scale student loan forgiveness plan: cancel all $1.6 trillion of student loan debt, including both private and federal student loans. Senate Democrats have called for $10,000 of student loan forgiveness, while some House Democrats have called for $30,000 of student loan forgiveness. Sen. Elizabeth Warren (D-MA) and Senate Minority Leader Chuck Schumer (D-NY) proposed to cancel up to $50,000 of student loan 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 have become law.

4. There is not growing bipartisan support to cancel student loan debt

Student loans may be a bipartisan issue, but there is not growing bipartisan support to cancel student loan debt. Most proposals to cancel student loan debt outright have come from Democrats, not Republicans. There has been myriad of legislation proposed, but no comprehensive student loan debt cancellation proposal has become law. Republicans recognize the magnitude of student loans as a consumer debt issue, but don’t support wide-scale plans to cancel student loan debt, citing cost and other concerns. Congress successfully passed the Public Service Loan Forgiveness program on a bipartisan basis in 2007, which was created during the administration of President George W. Bush. However, that program—which President Trump has proposed to end—is not a wide-scale student loan forgiveness program; it’s tied to full-time public service or non-profit work and applies to federal student loans.

That said, Republicans have joined Democrats on a bipartisan basis to pass student loan relief. This include both Senate Republicans and Trump, who spearheaded student loan relief in the Cares Act, the $2.2 trillion stimulus package Congress passed in March. Trump then extended student loan relief for federal student loan debt through December 31. Many Democrats and Republicans support income-driven repayment plans, which can help provide student loan forgiveness to borrowers after making 20 or 25 years of federal student loan repayments. However, this too is not outright student loan forgiveness.

Final Thoughts

Student loan debt impacts million of Americans. No matter where you stand on student loan forgiveness, remember this: Democrats and Republicans may agree on a stimulus deal that includes student loan forgiveness in limited size and scope. However, this likely will not be wide-scale student loan forgiveness nor should it be viewed as growing bipartisan support to cancel student loan debt. The reality is that both parties remain divided on student loan forgiveness, and each party believes there are different ways to tackle student loan debt. Therefore, don’t expect all your student loan debt to be cancelled in the near-term.

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