Student loan relief could happen with these 3 bills in Congress
Student loan relief could happen with these 3 bills in Congress.
Here’s what you need to know — and what it means for your student loans.
Student loan relief is possible if Congress passes more laws. It’s not just about President Joe Biden signing into law large-scale student loan forgiveness or extending the student loan payment pause. Congress has the power to act on one or more legislative proposals that could reshape the future of student loans and provide substantial student loan relief to millions of student borrowers.
Here are 3 bills in Congress that could create student loan relief for you:
1. Student loan cancellation for 36 million student borrowers
The most obvious student loan relief is large-scale student loan forgiveness. (Student loan cancellation and student loan payment suspension are confusing. Here’s what to know). While there are several legislative proposals, Senate Majority Leader Chuck Schumer (D-NY) and Sen. Elizabeth Warren (D-MA) have championed the main proposal for large-scale student loan forgiveness. Their plan would forgive up to $50,000 in student loans for federal borrowers who earn up to $125,000 in student loans. (Biden will forgive $6.2 billion in student loans). If Congress passes their proposal, 36 million student borrowers would have their federal student loans forgiven completely. That said, Congress did not vote on this legislation, nor did they have broad support among Republicans and Democrats.
(The new proposal would extend the student loan payment break and cancel student loans)
2. Cancel student loans in bankruptcy
Senator Dick Durbin (D-IL) and Senator John Cornyn (R-TX) introduced the NEW BEGINNING through the Bankruptcy Act, which would help borrowers obtain student loan forgiveness in the event of bankruptcy. As part of their plan, student borrowers who are in financial difficulty could have their federal student loan forgiven after 10 years. (Biden removed student loan forgiveness from his annual budget.) Student borrowers with private and federal student loans could also have their student loans forgiven in less than 10 years by proving “undue hardship.” This proposal has the potential to become law for several reasons. First, it is bipartisan legislation. Second, the Senate Judiciary Committee (of which Durbin and Cornyn are members) supports the bill. Third, the plan provides a fresh start for student borrowers through the bankruptcy process after a 10-year window. This is different from the large-scale automatic cancellation of student loans for every student borrower. On the other hand, this bill focuses on student borrowers who are experiencing financial difficulties.
(Here’s who won’t qualify for $6.2 billion in student loan forgiveness).
3. Eliminate interest on student loans
How about zero interest on your student loans? (Biden is expected to decide today to suspend student loan payments and cancel the student loan.) If Congress passes Sen. Marco Rubio’s (R-FL) bill, no interest on student loans could become a reality. Rubio introduced the Leverage Opportunities for Americans Now (LOAN) Act, which would eliminate interest rates on federal student loans. With no interest on student loans, student borrowers could repay their student loans faster and get out of debt faster. (The student loan forgiveness could be the reason the Democrats lose the midterm elections). What would replace interest on student loans? Instead of student loan interest, student borrowers would pay a one-time, non-compound origination fee, or financing fee, over the term of their student loan. Student borrowers would also be automatically enrolled in an income-based repayment (IBR) plan. Under this plan, they would pay 10% of their adjusted gross income above 150% of the federal poverty level, except during times of financial hardship.
Student loans: next steps
Despite the potential to create major changes for your student loans, Congress has not voted on any of these proposals. Large-scale student loan cancellation is a Democratic-led proposal. However, the elimination of student loan interest and the ability for more student borrowers to have access to student loan forgiveness in bankruptcy has Republican sponsors. Democrats and Republicans have the potential to work together to reform higher education. Student borrowers win when there’s bipartisanship in Congress — and these three bills (plus many more) could change your financial life.
The student loan payment break is scheduled to end on May 1, 2022. This means that student loan payments will soon be due. Now is the time to evaluate all of your options for repaying your student loan.
Here are some popular ways to repay student loans: