Today, the Senate is expected to vote for a new Covid aid package. Included in the bill is a clause that would make forgiveness of the approved student loan between December 31, 2020 and January 1, 2026, tax-free.
Although the bill itself does not include student debt forgiveness, the provision stands out as a potential sign that debt forgiveness is a serious priority on the horizon.
“If the language is as broad as it sounds, it would lay the groundwork for any student loan forgiveness, including President Biden’s $ 10,000 proposal, to be tax-free,” said higher education expert Mark Kantrowitz. “It would also seem to forgive after 20 or 25 years on an income-based, tax-free repayment plan.”
For example, if a borrower had forgiven $ 10,000 of student debt, he would not be taxed as if he had earned an additional $ 10,000 that year.
House and Senate Democrats have repeatedly asked Biden to “largely” forgive up to $ 50,000 of federal debt by executive decree, an approach that Senate majority leader Chuck Schumer reiterated that Biden should adopt during his first 100 years. days in office.
But Biden has repeatedly rejected the idea of up to $ 50,000 in student debt forgiveness and said he would only support up to $ 10,000 in debt forgiveness and that he preferred Congress to draft the legislation.
This reaction against the leaders of his own party raised concerns among defenders of student debt forgiveness and caused skepticism among borrowers hoping for relief.
While most US adults support forgiving the federal student loan, a recent survey by the OneClass study guide platform found that only 13% of current college students expect to see a student debt forgiveness policy implemented by the new administration.
“The federal government has had a disappointing record of providing relief to students who take out loans under the previous administration,” said Richard DeCapua, vice president for academic affairs at OneClass. “Although there are influential Democrats asking for the loan to be forgiven, students in general still do not believe that this relief will be in the near future.”
Another factor that can affect the timing and likelihood of student debt forgiveness being enacted is how easily new Education Department employees are transferred to power.
On Friday, the head of federal student aid, Mark Brown, resigned. Brown, a retired United States Air Force major general appointed by former Education Secretary Betsy DeVos in March 2019, shared the announcement in a video message sent to his team saying, “As I leave, I appeal to you to do whatever is necessary to support the policy elements of the current administration. “
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