Senate Majority Leader Chuck Schumer (left) and Speaker of the House Nancy Pelosi (right) (Photo by … [+]
Congress dropped 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 stimulus package doesn’t include any student loan cancellation.
So, what does this all mean for student loan cancellation?
Student loan cancellation 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 to cancel student loans immediately. However, his stimulus plan didn’t include any student loan cancellation either. Biden also wants Congress, not the president, to cancel student loans. Biden says he likely doesn’t have the authority to issue an executive order for wide-scale student loan cancellation. So, why didn’t Congress include student loan forgiveness in the stimulus package? (By the way, Congress also dropped student loan cancellation from the last stimulus package too). First, it’s possible that Democrats want to focus on stimulus checks and unemployment insurance as highest priority to stimulate the economy. Second, Republicans don’t support student loan cancellation, and including it in the stimulus package may have delayed the entire stimulus package. While student loan cancellation wasn’t necessarily expected to be included in this stimulus package, it’s still a disappointment to at least some of the 45 million borrowers who are expecting student loan cancellation. Why? Senate Majority Leader Chuck Schumer (D-NY) and Sen. Elizabeth Warren (D-MA) have said student loan cancellation is a top priority, but so far, Congress has not acted.
There are many potential changes to your student loans this year. Schumer has said he hopes to pass the stimulus package in the U.S. 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 wide-scale student loan cancellation through legislation, who will get student loan forgiveness? That’s an unsettled question. Increasingly, it looks like not everyone may get student loan forgiveness. Student loan cancellation has been talked about as a policy to cancel everyone’s student loan debt. However, Congress still needs to agree on how much student loan forgiveness and who qualifies. First, Congress has to determine how much student loan cancellation. While Biden wants $10,000 of forgiveness, Schumer and Warren are pushing for $50,000 of student loan forgiveness. Biden has said he won’t cancel $50,000 of student loans. Second, Congress needs to determine who qualifies. Congress may limit student loan forgiveness to student loan borrowers with less than $125,000 of income (or a lower income threshold). Congress also could limit student loan forgiveness to only student loans from college (excluding graduate school). Finally, Congress could limit student loan cancellation to federal student loans owned by the federal government, which could exclude some FFELP and Perkins Loans. Expect a student loans showdown no matter what Congress chooses because Republicans will oppose.
Call it the Bernie Sanders game plan. Sen. Sanders (I-VT), who supports cancelling all $1.7 trillion of student loan debt, recognizes that Republicans will seek to block any student loan cancellation bill. Even though Democrats control the U.S. Senate, Democrats need 60 votes to pass major legislation such as wide-scale student loan forgiveness. Procedurally, Sanders has a plan to cancel student loans without Republicans. Sanders says budget reconciliation can be used for student loan cancellation. However, there’s no guarantee that Schumer would endorse this strategy.
Will your student loans get cancelled? Not in this new stimulus package. If student loan cancellation is a top priority, why wasn’t it included? Biden has proposed to cancel student loans three ways. So, there are still opportunities to cancel student loan debt. That said, Congress hasn’t laid a clear path to student loan forgiveness.
Zack Friedman is the bestselling author of the blockbuster book, THE LEMONADE LIFE. Apple named The Lemonade Life one of “Fall’s Biggest Audiobooks” and a “Must-Listen.”