U.S. Sen. Charles Schumer has drawn up a plan to cancel up to $50,000 in debt for federal student loan borrowers.
The resolution outlines how the next president should use existing executive authority under the Higher Education Act to substantially cancel student loan debt for students in New York and across the country, and ensure there is no tax liability for federal student loan borrowers resulting from administrative debt collection.
“Millions of young New Yorkers and their families have been crushed by student loan debt, greatly impeding their ability to begin careers and build the financial resources needed to build their futures,” Schumer (D-N.Y.) said in a statement this week. “For far too long the sunny, American optimism of our young people has been clouded by crippling student debt. Education is supposed to be a ladder up, but studies have shown that student loans hold people back and prevent young college graduates from owning homes or starting small businesses. This holds our entire economy back, which we cannot afford after the financial devastation of COVID.”
Schumer said addressing the student loan crisis will be one of the first legislative actions he will prioritize in the new 117th Congress in January 2021.
“The bottom line is that the cost of college is out of control and paying for it forces millions of students and families to take on crippling debt, which greatly impedes students’ ability to get started and succeed after graduation. It is like starting a long walk with a backpack stuffed with bricks. This plan to cancel student debt on federal loans will substantially lighten that load and give recent graduates a huge boost that will launch them into a much brighter future – that will energize the economy and substantially expand our dwindling middle class.”
Schumer said the plan will provide complete forgiveness of student loans for more than 75 percent of borrowers across the country and at least some debt forgiveness for 95 percent of people with student loan debt. This is especially good news for the nearly 2.4 million New Yorkers with outstanding student loans and a cumulative debt of $89.5 billion as of March 2020, according to studentaid.gov.
Congress already has granted the secretary of education the legal authority to broadly cancel student debt under section 432(a) of the Higher Education Act of 1965, which grants the secretary the authority to modify, “… compromise, waive, or release any right, title, claim, lien, or demand, however, acquired, including any equity or any right of redemption.” The Department of Education has reportedly used this authority to implement modest relief for federal student loan borrowers during the COVID-19 pandemic.
The resolution aims to:
• Recognize the secretary of education’s broad administrative authority to cancel federal student loan debt under the existing authorities of section 432(a) of the Higher Education Act of 1965 (20 U.S.C. 1082(a));
• Call on the president to take executive action to administratively cancel up to $50,000 in federal student loan debt for federal student loan borrowers using existing legal authorities under such section 432(a), and any other authorities available under the law;
• Encourage the president, in taking such executive action, to use the executive’s authority under the Internal Revenue Code of 1986 to ensure no tax liability for federal student loan borrowers resulting from administrative debt cancellation;
• Encourage the president, in taking such executive action, to ensure that administrative debt cancellation helps close racial wealth gaps and avoids the bulk of federal student debt cancellation benefits accruing to the wealthiest borrowers; and
• Encourage the president to continue to pause student loan payments and interest accumulation for federal student loan borrowers for the entire duration of the COVID-19 pandemic.
Schumer introduced the resolution jointly with U.S. Sen. Elizabeth Warren (D-Mass.). The legislation follows their March effort to cancel student loan payments for the duration of the COVID pandemic and provide a minimum $10,000 payoff for all federal student loan borrowers.
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