It looks like Democrats may be backing off their proposal to cancel up to $50,000 of student loans for student loan borrowers.
Here’s what you need to know.
A new congressional proposal may represent a major departure from a plan for student loan forgiveness supported by progressive Democrats. Rep. Vincente Gonzalez (D-TX) introduced the Student Loan Relief Bill, which would cancel up to $25,000 of federal student loans for borrowers. Gonzalez introduced similar legislation in 2020 after the start of the Covid-19 pandemic. (How federal student loans will change this year).
Progressive Democrats in Congress have been touting a plan from Senate Majority Leader Chuck Schumer (D-NY) and Sen. Elizabeth Warren (D-MA) to cancel up to $50,000 of student loans. (Student loan forgiveness could be the reason that Democrats lose the midterm elections). Schumer, Warren and other progressive Democrats want President Joe Biden to use executive authority to cancel student loans for borrowers. (Biden has cancelled $15 billion of student loans). If Biden cancelled up to $50,000 student loans for borrowers, it would completely cancel student debt for 36 million borrowers at a total cost of $1 trillion. Biden, however, says he doesn’t believe he has legal authority to cancel student loans without further authorization from Congress. Biden consistently has supported $10,000 of student loan forgiveness for borrowers, but wants Congress to pass legislation that he would then happily sign into law. (Where Biden stands on student loan cancellation).
How this student loan cancellation compares
This new proposal for $25,000 of student loan cancellation differs from Schumer and Warren’s plan for $50,000 of student loan cancellation. (Here’s who won’t get student loan forgiveness). First, Gonzalez’s plan would cancel federal student loans starting with the balance with the highest interest rate. Second, this student loan cancellation plan doesn’t have income limits. In contrast, Schumer and Warren’s plan only applies to student loan borrowers with an income up to $125,000 of student loans. If you earn higher income, you wouldn’t qualify for any student loan forgiveness. However, this new proposal doesn’t have an income cap, meaning any income earner conceivably could get federal student loan cancellation. (Do you qualify for $5 billion of student loan forgiveness?)
Student loans: final thoughts
While there are other plans in Congress to cancel student loans, this new proposal offers half of the student loan forgiveness that progressive Democrats support. Congress hasn’t passed any wide-scale student loan cancellation, and it’s unlikely Congress will cancel student loans of any amount, including $10,000 of student debt. However, this new proposal of $25,000 of student loan forgiveness represents a clear shift from the $50,000 of student loan cancellation rhetoric. While this may be a one-off proposal, it’s possible that Democrats may back away from their plan to cancel up to $50,000 of student loans, which has not gained popularity in Congress or from the president.
Here are some popular ways to save money and pay off your student loans faster: