House Democrats unveiled a proposal to cancel student loan debt for millions of borrowers on Monday amid the coronavirus outbreak.
The bill, called the Student Debt Relief Act, would cancel $30,000 in student debt for borrowers. The forgiveness would also be tax-free, meaning it would not be taxed as income. For those who owe more than $30,000, the government would assume their monthly payments. Additionally, all efforts by the Department of Education to collect debts would be suspended.
More than 43 million Americans owe a share of the $1.5 trillion in student loan debt today. Federal loans comprise $1.3 trillion of that.
“During this unprecedented crisis, no one should have to choose between paying their student loan payment, putting food on the table or keeping themselves and their families safe and healthy,” Rep. Ayanna Pressley (D-MA), one of the lead sponsors told Yahoo Finance. “We must prioritize debt cancellation for the 45 million student loan borrowers who are struggling to pay off their debt during this difficult time.”
Borrowers can apply for an interest rate freeze that President Trump announced earlier this month. According to Yahoo Finance, the ED has two options for borrowers: The department has dropped interest rates on student loans automatically to 0% for at least the next 60 days, and those who are having real difficulty with their loans can request interest-free forbearance from their servicer for at least two months — and require no documentation to receive it. Also, if borrowers are more than 31 days delinquent on their federal loans as of March 13, their payments are now suspended. According to ED, more than 3.2 million federal student loans are more than 31 days delinquent. 7.7 million are in default. Many borrowers are not eligible for that option at this time, according to Forbes.
The initial coronavirus relief package called for some help for students, but Democrats feel it doesn’t go far enough. Sen. Lindsey Graham (R-S.C.) opposes the bill, telling Fox News that student loan debt is not the biggest issue America is facing right now.
“Democrats are trying to reduce student loans by $10,000. What the hell has that got to do with the virus?” Graham (R-SC) told Fox News Sunday. “I’m sure everybody could use more money, but I don’t want to give money to people who have a paycheck. I want to give money to people who have lost their jobs.”