President Trump has offered to write off some student debt as part of a new $ 1.8 trillion stimulus package to House Democrats, signaling how fast the idea of canceling student debt has gained wide bipartisan appeal.
Trump’s latest attempt to restart stimulus talks comes after he abruptly ended congressional negotiations last week. The administration is now proposing that $ 25 billion of the $ 1.8 trillion package be spent on canceling student loans. That figure is only a tiny fraction of the estimated $ 1.7 trillion in total student loan debt, indicating that the effort would have little impact if passed. The administration did not specify how it proposed to allocate the $ 25 billion, nor did it specify who would be eligible for the student loan exemption.
Although the offer is relatively small, the openness is an indication of how quickly the concept of student loan cancellation has become widespread. The widespread cancellation of student loans has evolved in recent years, from a fringe idea to a serious political initiative with growing support from elected officials. And the public supports the concept. A recent poll conducted last month by Data for Progress found that 67% of respondents, including 58% Republicans, support some form of blanket student loan cancellation – whether universal, income-related or based on eligibility for a specific program. Only 26% of respondents said student loan debt should not be canceled.
President Trump’s offer does not go as far as other proposals put forward by Democrats in Congress. House Democrats topped $ 3.4 trillion Act on the HEROES in May, which would also have extended the student loan payment and interest suspension of the CARES Act until September 30, 2021, and expanded those protections to include FFEL program federal student loans issued in commerce and Perkins loans. . The bill also provided for an overall rebate of $ 10,000 on student loans for financially troubled borrowers. Meanwhile, Senator Elizabeth Warren and Senatorial Minority Leader Chuck Schumer presented a Senate resolution last month he asked for a student loan forgiveness of $ 50,000.
Democrats in Congress have presented canceling student loans as an imperative not only in response to the coronavirus pandemic and recession, but also as a matter of racial justice. “Black students represent, on average, nearly 20 percentage points more likely to take out federal student loans, [and] half of black borrowers and a third of Latin borrowers default on their loans 20 years from now, ”Senators Warren and Schumer said in a joint statement unveiling their resolution. “Cancel student loan debt would increase wealth for black and latin families, help them avoid default and start bridging the racial wealth gap. “
Former Vice President Joe Biden has also embraced the blanket cancellation of student loans as part of his platform. As part of his plan, Biden would write off all federal undergraduate student loan debts for borrowers with annual incomes below $ 125,000 who attended public colleges and universities, as well as historically black colleges and universities (HBCU) and private institutions serving minorities (MSI). Biden also supports $ 10,000 blanket student loan cancellation for all borrowers as an economic stimulus in response to the recession. It also expressed support for Senator Warren’s proposal to amend the bankruptcy code to make it easier for student loan debt to be discharged in bankruptcy, and promised to provide debt relief to aggrieved borrowers by predatory for-profit colleges.
For borrowers working in the public service, Biden said he supports overhauling the public service loan forgiveness program to make all federal student loans and repayment plans eligible (which could resolve many of the current issues associated with the program), and to allow for a phased loan forgiveness for each year of utility over a 10-year period. Currently, borrowers must make 10 years of qualifying payments under specific repayment plans before obtaining relief under the program. He also suggested that he make income-based repayment more affordable for some borrowers.
It’s unclear whether President Trump’s latest proposal will gain traction. Regardless of how it is allocated, $ 25 billion in student loan cancellations would only benefit a small fraction of student loan borrowers and represent less than 1.4% of the $ 1.7 trillion in debt. total student.
House Speaker Nancy Pelosi had previously slashed the price of the HEROES Act from $ 3.4 trillion to $ 2.2 trillion in an attempt to compromise with the White House, but her efforts were rejected when President Trump pulled out of stimulus negotiations last week. Pelosi said the White House’s latest proposal did not go far enough. “This proposal was a step forward, two steps back,” Pelosi told fellow House Democrats. “When the president talks about wanting a bigger back-up plan, his proposal seems to mean he wants more money at his discretion to grant or withhold, rather than accepting language prescribing how we honor our workers, crush the viruses and put money in the pockets of workers.
Meanwhile, for many Republicans in the Senate, the White House proposal goes too far. GOP senators have reportedly voiced strong opposition to Trump’s $ 1.8 trillion proposal during a call with Treasury Secretary Steve Mnuchin, and some Republican senators are opposed to any further stimulus spending. So even if Pelosi comes to a deal with the White House, Republicans in the Senate could still derail any deal.