If Congress cancels student loans, any plan for student loan cancellation should include these 3 things.
Here’s what you need to know.
Senate Majority Leader Chuck Schumer (D-NY) and Sen. Elizabeth Warren (D-MA) want you to get up to $50,000 of student loan cancellation. Currently, however, there is no clear path to cancelling $50,000 of student loans. President Joe Biden has said he won’t support this, and Congress won’t support it either. It’s possible that Congress passes student loan forgiveness of $10,000 or a smaller amount. However, that amount isn’t guaranteed either. So, where do we go from here? How does Congress move toward a bipartisan solution?
If Congress cancels student loans, here are 5 things Congress should consider:
1. Not everyone gets student loan cancellation
There have been broad calls to “cancel all student loans.” Sen. Bernie Sanders (I-VT) called for cancelling all $1.7 trillion of student loans, including all private and federal student loans. However, there are no serious proposals in Congress to cancel all student loan debt. If you’re hoping for all your student loans to be cancelled, please know that it’s very low probability. In addition to how much student loan forgiveness, Congress will need to target who qualifies for student loan forgiveness. Currently, Schumer and Warren want student loan cancellation for borrowers who have federal student loans and earn less than $125,000. Opponents of student loan cancellation don’t want student loan cancellation for everyone. Therefore, Congress will need to target any student loan forgiveness for borrowers who are financially struggling. This may include individuals who are unemployed or earn low income, for example. As Congress targets who would qualify, Congress will need to define what constitutes “low income.” That may amount may be $125,000, but it also could be a lower amount such as $75,000 or $50,000 or $30,000, for example. To reach bipartisan consensus, progressives may have to compromise on the targeting issue.
2. Not everyone has student loans
The goal of student loan cancellation is to provide immediate financial relief to student loan borrowers who are struggling financially and drowning in student loan debt. It’s also important to recognize that student loan debt impacts approximately 45 million people. However, there are nearly 200 million adult Americans who don’t have student loans. This includes tens of millions of individuals who never attended college. These individuals also may be unemployed and are struggling financially. They’re working multiple jobs, may be behind on medical bills, and can’t pay their rent or mortgage. There are many reasons to cancel student loans, but if financial relief is the goal, there are almost five times as many Americans who don’t have student loans. This doesn’t mean student loan borrowers don’t need student loan relief. However, progressives in Congress may need to weigh this fact as they think about providing financial relief. The stimulus checks in the new stimulus package provide some economic relief, but they’re less than a possible $10,000 of student loan forgiveness.
3. Some borrowers paid off student loans
Student loan cancellation is a one-time plan. This means that if you have student loans on the day student loans are cancelled, you get student loan forgiveness. If you paid off student loans the day before, or borrow student loans the next day, you’re out of luck. Progressives in Congress should expect push back from borrowers who made substantial sacrifices to pay off student loans. This may have included not getting married, postponing starting a family or buying a home, not saving for retirement, or working multiple jobs. Congress could ignore these borrowers and say that they feel sympathetic, but Congress won’t retroactively cancel student loans. However, many of these borrowers are their constituents. This doesn’t mean a borrower who paid off student loans in 1985 should be made whole, but what about the borrower who paid off student loans last week, last month or last year?
Will your student loans get cancelled?
Will your student loans get cancelled? In the quest for student loan cancellation, student loan forgiveness could help provide needed financial relief, and could be a new beginning for millions of student borrowers. To pass comprehensive student loan cancellation, Congress will need to forge a bipartisan solution. This may involve being thoughtful about the amount of forgiveness and who qualifies, particularly if the goal is to help student loan borrowers who are struggling the most. At the same time, Congress could dismiss non-student loan borrowers or those who repaid student loans, but they should be considered as part of an overall solution. Most importantly, student loan cancellation only would be part of an economic fix. The bigger issue is addressing the cost of higher education so that college can be more affordable. As you think critically about how to address your student loans, here are some options to consider, all of which have no fees: