These days the media is busy with student loan forgiveness news and updates. The whole debt cancellation process is confusing because of the conflicting ideas and parties. Some support $10,000 in contrast to others pressuring for $50,000 forgiveness. Meanwhile, it is still questionable whether the president will get Congress approval or take bold action to provide the cancellation through executive order.
The news can be complex, but not our blogs. This guide will answer all your questions regarding the student loan forgiveness discussion.
$50,000 Worth Student Loan Forgiveness
Almost a year ago, Biden expressed his intent and support to cancel some portion of student loan forgiveness. In particular, he proposed eliminating $10,000 debt per borrower to help families with financial challenges. However, some Democrats went further and suggested that $50,000 forgiveness is necessary. Specifically, Senator Elizabeth Warren and Majority Leader Chuck Schumer were the main people behind this idea.
Unlike Biden’s initial proposal, $50,000 forgiveness will not be granted to all borrowers. Instead, federal loan borrowers with less than $125,000 yearly income will qualify for forgiveness. The advocates of forgiveness argue that the cancellation is necessary to stimulate the economy and reduce inequality.
Forgiveness in Details
Together with other Democrats, Warren and Schumer put forward a resolution in February that proposes $50,000 for borrowers through executive order. Executive action allows the president to provide forgiveness without getting approval from Congress.
Schumer noted that people of color get impacted more at the time of crisis. Hence, the officials must do everything to support American families and stimulate the economy. Therefore, the Democrats took bold action and requested the president to cancel the $50,000 student loan debt.
However, a $50,000 student loan cancellation will not be accessible to all debtors. We will explain the details in the following section. Later, we will present the challenges the proposal faces.
Please, keep in mind that Biden did not add forgiveness to his economic stimulus package. However, the Democrats keep pressuring the president to forgive the student loan debt, even without Congress approval. In turn, Biden also prefers a legislative approach rather than executive action.
If the officials cancel $50,000 debt for all borrowers, there would be a sharp decrease in total student debt balance- from $1.7 trillion to just $700 billion. However, debt expert Kantrowitz noted that the forgiveness could benefit 80% of borrowers, which is around 36 million. Unfortunately, even if the forgiveness is granted, many borrowers still are left with more than $50,000 in debt.
Yet, the views on forgiveness are complicated. Some people think that forgiveness is unfair because it is funded with the taxpayers’ money. Not all taxpayers got loans to fund their education or are educated.
On the other hand, forgiveness can be necessary, especially at these economically challenging times. During the pandemic, many people lost their jobs, and the default/delinquency rate became 1 out of 4 people. Besides, when the government announced an 8-month debt suspension, 90% of borrowers accepted the offer.
Experts also say that such debt cancellation will be more helpful to those suffering the most, such as people of color, seniors with debt, and recent graduates. For example, women will benefit more from the debt cancellation because more than 60% of the borrowers are female. The average debt white women owe is around $1,400 more than white men owe, while this amount is $1,900 for black women.
When it comes to people of color, they request student loans more than white students. 85% of black students need federal debt than 69% of white students.
How Likely is Student Loan Forgiveness?
All the benefits that direct student loan forgiveness can bring are still questioned. The biggest challenge in this way is making Congress accept such a proposal. However, some argue that Joe Biden has the power to unilaterally enforce the bill without Congress’s approval. Hence, the debates still continue whether the student loan forgiveness will be accessible at all.
White House’s Updates
On February 4th, White House Press Secretary, Jen Psaki, twitted to show the president’s support for the debt cancellation to bring relief to borrowers. She mentioned the possibility of executive action, but at the same time, she noted that the president also welcomes signing the bill through Congress.
Please, note that executive orders are different from legislation and they do not require Congress’s approval. However, such actions can also be subject to judicial review or be reversed.
Warren and Schumer mentioned that the president could bring the forgiveness opportunity without approval because the Higher Education Act allows him to modify. They claim that the president can have this right without any questions.
However, the tweet once again confirmed that though the officials look for ways to validate executive action, the president still prefers getting Congress approval for the debt cancellation. Yet, Congress’s approval is not likely to be achieved in the short term.
Conflicts in Approval
As mentioned, although some parties claim that Biden can provide forgiveness through executive action, the president prefers getting Congress by his side. In such a case, a question arises why Congress is not likely to approve the forgiveness bill?
The problem is that it is hard to get Republican’s support. Besides, some Democrats might also wish to make changes in the proposal. Hence, if voted, the bill can fail. On the other hand, Bernie Sanders, the chairman of the Budget Committee, suggested getting approval through the process called Budget Reconciliation. With this method, it is not required to get majority support. Before, the Republicans also used it to pass major tax breaks. However, Budget Reconciliation has its disadvantages. First, it can be utilized only a few times during the presidency. Second, it can allow other parties to make changes to the bill.
What about Private Loans?
If you have private loans, the bad news: the proposed programs do not cover the private debt. In general, private debtors cannot apply to government-provided forgiveness or discharge programs, like the Public Service Loan Forgiveness. You can check the Private Student Loan Forgiveness options in our blog.
What Should Federal Borrowers Do?
As mentioned before, the discussions on student loan forgiveness are extensive. It is still unclear whether the president will provide the cancellation or in which amount the forgiveness would be. Besides, the eligibility criteria are yet to come.
Sure, it is good to follow the news and our blogs for more clarification. However, the borrowers should not rely on the government’s forgiveness claims to get rid of the debt:
- There is no guarantee that the cancellation will ever be possible.
- It can take a lot of time to get access to forgiveness.
- Even if the forgiveness proposal is accepted, many borrowers can be ineligible.
Instead, borrowers need to explore their options. Debtors can enjoy other forgiveness opportunities, like the Public Service Student Loan Forgiveness, Teacher or Perkins Loan Forgiveness. Additionally, discharge programs, repayment plans, consolidation, or refinancing opportunities exist to help borrowers.
You can reduce or eliminate the federal debt. All you need to do is find the right solution, which is as simple as contacting Student Loans Resolved debt experts.