Student Loan Forgiveness And $1,200 Second Stimulus Check Included In New Stimulus Proposal
House Democrats want one more bite of the apple with student loan forgiveness.
Here’s what you need to know.
Student Loan Forgiveness
House Democrats pitched an ambitious $3 trillion new stimulus spending proposal – called the HEROES Act – that, among other benefits, includes a new, one-time stimulus check for $1,200 for each individual ($2,400 for married couples) and $1,200 for each dependent (with a maximum of three dependents). Also included – in addition to extended unemployment benefits – is a student loan forgiveness proposal to cancel $10,000 of student loan debt.
This student loan forgiveness proposal is pared back significantly from some previous student loan forgiveness proposals offered by presidential candidates and members of Congress. For example, the House stimulus bill proposal most closely mirrors a proposal from Senate Democrats, whose student loan forgiveness plan would forgive at least $10,000 of federal student loans for all borrowers. However, the current proposal is much smaller than an earlier House Democrats proposal that called for $30,000 of student loan forgiveness. The HEROES Act also proposes that the U.S. Treasury pay $10,000 of private student loan forgiveness (but not more than your total balance, if you owe less than $10,000).
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Forgive Student Loans: Comparison To Presidential Candidates
The current proposal to forgive $10,000 of federal student loans is substantially less than proposals from three 2020 presidential candidates: Joe Biden, Bernie Sanders and Elizabeth Warren. Here are recent student loan forgiveness plans from the three candidates:
- Sen. Bernie Sanders (I-VT) proposed $1.6 trillion of student loan debt forgiveness, which would cancel all federal and private student loans.
- Former Vice President Joe Biden called for student loan forgiveness for all undergraduate tuition-related federal student debt from two- and four-year public colleges and universities for borrowers who earn less than $125,000 per year. Biden also has proposed a $750 billion student loan plan focused on income-driven repayment.
- Sen. Elizabeth Warren proposed a student loan forgiveness plan to cancel student loan debt for 95% of Americans.
Why $10,000 Of Student Loan Forgiveness?
For supporters of student loan forgiveness, $10,000 of student loan forgiveness is a much smaller than cancelling all $1.6 trillion of student loan debt forgiveness. Why is this current proposal smaller than student loan debt cancellation plans proposed by Biden, Sanders and Warren? Here are a few potential reasons why Democrats proposed $10,000 of student loan debt forgiveness:
- Similar To Senate Plan: The $10,000 amount matches a similar plan offered in the U.S. Senate, which can help build support in the Senate.
- Other Priorities: While student loans may be your top priority, legislators are balancing multiple high priority measures that are essential during the COVID-19 pandemic. Student loan debt forgiveness has relatively less bi-partisan support in both houses of Congress.
- Help Struggling Borrowers: Borrowers who default on their student loans have relatively low student loan balances. A lower student loan forgiveness amount could help these borrowers in particular.
Student Loan Repayment Options
While public leaders debate the future of student loan forgiveness, remember that you need a student loan repayment plan. These four options are a good place to start:
- Student loan refinancing
- Student loan consolidation
- Income-driven repayment plans
- Student loan forgiveness