Congress removed the student loan cancellation from the new stimulus package – again.
Here’s what you need to know – and what it means for you.
In response to the Covid-19 pandemic, the House of Representatives passed a $ 1.9 trillion stimulus package that includes stimulus checks and unemployment insurance. However, the recovery plan does not include any student loan cancellation.
So what does all of this mean for student loan cancellation?
1. Congress will not cancel student loans in the stimulus package
The cancellation of student loans is supported by some progressives in Congress, but apparently not enough to be included in this new stimulus package. President Joe Biden, who proposed the $ 1.9 stimulus package, wants Congress cancel student loans immediately. However, his stimulus package also did not provide for student loan cancellations. Biden also wants Congress, not the president, to cancel student loans. Biden says he probably doesn’t have the authority to issue an executive order for the large-scale cancellation of a student loan. So why did Congress not include the cancellation of student loans in the stimulus package? (By the way, Congress also dropped the cancellation of student loans from the latest stimulus package too much). First, the Democrats may want to focus on stimulus checks and UI as a top priority to stimulate the economy. Second, Republicans do not support canceling student loans, and its inclusion in the stimulus package may have delayed the entire stimulus package. While the cancellation of student loans is not necessarily included in this stimulus package, it is still a disappointment for at least some of the 45 million borrowers waiting for their student loan cancellation. Why? Senate Majority Leader Chuck Schumer (D-NY) and Senator Elizabeth Warren (D-MA) have said canceling student loans is a top priority, but so far Congress has failed not acted.
2. Not everyone will get a student loan discount
There is a lot of potential changes to your student loans this year. Schumer said he hoped to pass the stimulus package in the US Senate without any major changes. This suggests that Schumer will not try to add student loan cancellation to the stimulus package. So what does this mean for student loan borrowers? Congress could pass student loan cancellation through separate legislation. The next question is, if Congress passes a large-scale student loan cancellation through legislation, who will get a student loan forgiveness? This is an open question. More and more it looks like Not everyone can get a student loan discount. Student loan cancellation has been referred to as a policy to cancel everyone’s student debt. However, Congress has yet to agree on how much student loan forgiveness and who is eligible. First, Congress must determine the amount of the student loan cancellation. While Biden wants a $ 10,000 rebate, Schumer and Warren ask for a $ 50,000 student loan rebate. Biden has said he will not cancel $ 50,000 in student loans. Second, Congress must determine who is eligible. Congress can limit student loan cancellation to student loan borrowers with incomes below $ 125,000 (or a lower income threshold). Congress could also limit the cancellation of student loans to only college student loans (excluding graduate studies). Finally, Congress could limit student loan cancellation to federal student loans held by the federal government, which could exclude certain FFELP and Perkins loans. Expect a student loan showdown it doesn’t matter what Congress chooses because Republicans will oppose it.
3. Cancel student loans without Republicans
Call it Bernie Sanders’ game plan. Senator Sanders (I-VT), who supports the cancellation of the entire $ 1.7 trillion in student debt, recognizes that Republicans will seek to block any student loan cancellation bills. Even if Democrats control the US Senate, Democrats need 60 votes to pass major legislation such as large-scale student loan cancellation. Procedurally, Sanders has a considering canceling student loans without Republicans. Sanders says the budget reconciliation can be used to write off a student loan. However, there is no guarantee that Schumer would approve this strategy.
Will You Get A Student Loan Discount?
Will your student loans be canceled? Not in this new stimulus plan. If student loan cancellation is a top priority, why was it not included? Biden proposed to cancel student loans in three ways. So, there are still possibilities to write off student loan debt. That said, Congress has not charted a clear path to canceling student loans.