Latest Stimulus Proposals Do Not Include General Student Loan Discount

Negotiations over a new stimulus package have gained momentum in Congress, but so far the two main proposals have not included the blanket cancellation of student loans.

Earlier this week, a bipartisan group of senators unveiled a new $ 900 billion stimulus package as a compromise measure between earlier partisan proposals pushed by House Democrats and Senate Republicans. This proposal includes $ 4 billion for student loan relief. This allocation of federal funds could be sufficient to cover a temporary extension of the current moratorium on student loan payments, interest and collections, although no specific details regarding student debt relief related to this stimulus proposal. ‘has yet been disclosed. But $ 4 billion would not be enough to enact significant student loan forgiveness; the figure represents a fraction of a percentage point of the total outstanding student debt.

Meanwhile, Senate Majority Leader Mitch McConnell has implicitly rejected efforts to reach a bipartisan consensus on a new stimulus package. Instead, later in the week McConnell began pushing his own more partisan counter-offer – a narrower $ 500 billion stimulus package that mirrors the proposal put forward by Republican senators earlier in the year. . This proposal would apparently not include any additional student loan relief – not even $ 4 billion – and certainly does not include any blanket student loan relief.

So where does that leave borrowers?

The second round of the Senate in January is the key

If Congress does not pass any student loan cancellation measures as part of a stimulus bill passed this month, all is not lost. The new Congress – which will sit next month – could try again.

But while Joe Biden’s victory in November bodes well for student loan borrowers, Democratic performances in the descending ballot races in Congress have fallen well below expectations. Democrats have retained the bare-majority House of Representatives after several incumbent defeats in swing districts. And Democrats only won one net Senate seat, barring an absolute majority. The ultimate fate of the Senate will now be determined by two second-round elections in Georgia scheduled for January, which are draws.

If the Democrats won the second two elections, they would only have a simple majority. The Senate split would be 50-50, with Vice President Kamala Harris breaking the tie. But that does not guarantee the passage of general legislation on the cancellation of student loans. So far, Republicans in Congress have largely opposed the idea of ​​canceling student debt. And there are reports that even some Congressional Democrats have reservations about passing too broad student loan relief.

Regardless of the exact outcome of the January runoff, Congress will remain very divided, making it difficult for Biden to get an ambitious student loan legislative package approved.

Executive action by Biden

Regardless of the exact makeup of Congress in 2021, Biden has indicated his willingness to enact policy changes through aggressive executive action if necessary. And that could include action on student loan debt – but he hasn’t indicated how far he’s willing to go.

Consumer rights advocates and Progressive Democrats in Congress are pushing Biden to use executive action to enact sweeping student loan cancellation, rather than rely on Congress to pass legislation. In September, Senator Elizabeth Warren (D-MA) and Senatorial Minority Leader Chuck Schumer (D-NY) introduced a resolution in the Senate calling on the next president to use the executive power to write off $ 50,000 in student debt for each borrower. A broad coalition of civil rights and consumer protection organizations joined a growing chorus of advocates calling on Biden to do just that.

Advocates for student loan borrowers have pointed to a provision in the higher education law that they say gives broad power to the president, through the education secretary, to “modify, compromise, cancel or release loans.” students ”. Several student loan experts have argued that using this executive power to enact a broad student loan exemption is legal. But opponents fear that such executive action could face legal challenges on the grounds that it exceeds the authority granted by Congress.

So far, Biden has not publicly indicated whether he will take executive action to write off student loan debt, although he has reiterated his support for a large student loan forgiveness. Biden may be waiting first to see if Congress manages to pass a new stimulus package during the lame duck session that includes student loan relief. He is also probably awaiting the results of the second round of the Georgian senatorial elections before making any commitments.

Other student loan forgiveness possibilities

Once in office, Biden doesn’t necessarily have to limit his actions to a blanket student loan forgiveness if Congress doesn’t act.

For example, Biden proposed to improve the civil service loan forgiveness by allowing a phased loan forgiveness over the 10-year program, rather than requiring borrowers to complete 10 years of employment before obtaining a loan forgiveness. relief. He also called for addressing issues associated with the program, which currently only has a 1-2% approval rate. This could bring almost immediate relief to tens of thousands of student loan borrowers who are on the right track to paying civil service loans.

Biden also expressed strong support for the Borrower Against Repayment Defense program, which was enacted to provide relief to borrowers defrauded by their schools. Biden could quickly reverse new regulations passed by the Trump administration that restricted the program, while also ending numerous lawsuits against Education Secretary DeVos on terms favorable to borrowers. The net result could be a fairly widespread student loan forgiveness for borrowers who have been harmed by unfair, deceptive, or predatory school practices.

Further reading

New stimulus bill could extend student loan relief and unemployment benefits – but does not include any cash payments

Will Trump extend student loan relief? We may know soon

Could Biden write off some student debt with executive action?

What the election results mean for student loan borrowers

Biden’s win means DeVos is out by January

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