Advocates hope that a key provision in the US bailout will allow President Joe Biden to write off the student loan debt of millions of Americans.
While the $ 1.9 trillion COVID-19 stimulus bill has not wiped out student debt, it has made future student loan forgiveness tax-exempt for the next several years. Now advocates and some lawmakers are hoping this provision could allow President Biden for outstanding student loans. Visit Bridge Payday for more information about student loans
Senate Democrats, led by Senator Elizabeth Warren (D-MA) and Senator Bob Menendez (D-NJ), included the provision in the bill, allowing there to be no tax on student loans canceled until 2025.
“This is a huge win for millions of Americans burdened with student loan debt – NO SURPRISE TAX BILLS on canceled college loans,” Menendez tweeted after its amendment with Warren passed in the Senate in early March.
When student loans are canceled, usually as part of an income-oriented repayment plan, they are usually treated as taxable income. Now that the COVID-19 relief bill has been enacted, some are hoping Biden will expand the pool of people with canceled debt. According to some estimates, 45 million borrowers hold $ 1.7 trillion in student debt in America.
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Biden previously expressed support for Congress eliminating $ 10,000 in student loan debt for individuals. However, when asked at a CNN town hall in February if he would increase that proposal to $ 50,000, he said he “wouldn’t do that.”
Sen. Chuck Schumer (D-NY) and Rep. Ayanna Pressley (D-MA) have a total of 62 cosponsors supporting a resolution calling on Biden to write off $ 50,000 in student loan debt using existing authority under the higher education law. Biden said he didn’t think he had the power to do it by executive order. Schumer and Warren publicly disapproved of this assessment.
Student loan forgiveness will not be included in President Biden’s annual White House budget, further diminishing hopes that there will be a blanket cancellation of $10,000 in loans, let alone $50,000. While options remain—Congress, executive action—it seems more likely that loan forgiveness will only be expanded through reforms to existing loan relief programs. Here’s what you need to know.
What’s going on with student loan forgiveness?
Biden has said he supports cancelling $10,000 in federally-backed student loan debt, but that it should be passed through Congress, stating in a February town hall that “I don’t think I have the authority.” Nevertheless, a few weeks ago he directed the U.S. Department of Education to review his legal authority to forgive student loan debt through executive order.
But as higher education expert Mark Kantrowitz put it to CNBC, this might be a way for Biden to pass the buck over to Congress, his preferred option all along: