Today the Senate is expected to vote on a new aid package for Covid. The bill includes a provision that would make forgiveness of student loans tax-free between December 31, 2020 and January 1, 2026.
While the bill itself does not include student debt forgiveness, the provision stands out as a possible sign that debt cancellation is a serious priority on the horizon.
“If the language is as broad as it seems, it would lay the foundation for any student loan waiver, including President Biden’s $ 10,000 proposal, to be tax-free,” said higher education expert Mark Kantrowitz. “It also seems to make forgiveness tax-free after 20 or 25 years in an income-oriented repayment plan.”
For example, if a borrower was forgiven $ 10,000 in student debt, he wouldn’t be taxed as if he had made an extra $ 10,000 that year.
Democrats in the House and Senate have repeatedly urged Biden to “globally” forgive up to $ 50,000 in federal debt through an executive order, an approach Senate majority leader Chuck Schumer has reiterated that Biden during should take his first 100 days in office.
But Biden has repeatedly rejected the idea of up to $ 50,000 in student debt cancellation, stating that he will only support up to $ 10,000 in debt cancellation and that he would prefer Congress to pass the legislation.
This pushback against leaders of his own party has sparked concern among advocates of forgiveness of student debts and skepticism among borrowers hoping for relief.
While a majority of American adults support forgiveness of the federal student loan, recent polls by the study guide platform OneClass found that only 13% of current students expect a student loan waiver policy to be implemented by the new government.
“The federal government has a disappointing track record of providing student loan assistance under the previous administration,” said Richard DeCapua, vice president of academic affairs at OneClass. “While there are influential Democrats asking for loan forgiveness, students in general still don’t believe this relief will be in the foreseeable future.”
Another factor that can influence the timing and likelihood of student debt cancellation is how smoothly new officials from the Ministry of Education are converted to power.
On Friday, federal student aid chief Mark Brown resigned. Brown, a retired U.S. Air Force Major General appointed in March 2019 by former Secretary of Education Betsy DeVos, shared the announcement in a video message to his staff, saying, “As I step aside, I urge you to do so. whatever is necessary to support the policies of the current government. “
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