House Representatives Ayanna Pressley (D-MA) and Ilhan Omar (D-MN) are proposing to cancel student debt with new legislation aimed at helping borrowers adversely affected by the coronavirus, or COVID-19.
The legislation, called the Student Debt Emergency Relief Act, proposes the cancellation of at least $30,000 in outstanding debt, tax-free, and proposes that the Education Department (ED) “immediately assume responsibility” for the monthly payments of borrowers who hold federal loans while suspending involuntary collections or garnishments of wages or federal income tax returns amid the crisis.
“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. Pressley said in a statement. “We must prioritize debt cancellation for the 45 million student loan borrowers who are struggling to pay off their debt during this difficult time.”
Democrats including Sens. Chuck Schumer (D-NY), Patty Murray (D-WA), Sherrod Brown (D-OH), and Elizabeth Warren (D-MA) previously proposed to cancel monthly payments for the duration of the national emergency and asked ED to pay at least $10,000 for all federal loan borrowers.
“Democrats are trying to reduce student loans by $10,000. What the hell has that got to do with the virus?” Senator Lindsey Graham (R-SC) told Fox News on 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.”
ED has officially offered two options for borrowers at present: 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.
Additionally, 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.
Student debt relief will ‘free up needed money’
Presently, there are more than 43 million Americans with $1.5 trillion in student loan debt. Federal loans comprise $1.3 trillion of that.
Consumer advocates were happy with the representatives’ proposal.
“Rep. Pressley’s legislation would free up needed money to go to food and other essentials,” Alexis Goldstein, senior policy analyst at the Americans for Financial Reform, argued in a statement. “Instead of wages being garnished to cover student loans, borrowers would pass the savings right back into the economy by spending to meet day-to-day needs."
"We failed to address student debt in the last recession and we cannot afford to make this same mistake again,” Seth Frotman, former student loan ombudsman at the Consumer Financial Protection Bureau, added in a statement. “Student loan companies are shutting their doors and turning off their phones in response to the coronavirus pandemic, cutting off borrowers from access to critical protections ...
If borrowers have nowhere to turn to get help, lawmakers must immediately cancel student loan payments for all Americans with federal student loans.”
Aarthi is a writer for Yahoo Finance. She can be reached at email@example.com. Follow her on Twitter @aarthiswami.