Schumer: Cancel student debt
Senate majority leader urges Biden to erase $50,000 in loans for each borrower
Schumer pushes Biden to wipe away $50,000 in student loan debt per borrower.
After the American Rescue Plan waived taxes on canceled student loan debt, Senate Majority Leader Charles E. Schumer, D-N.Y., said Monday there’s no reason President Joe Biden shouldn’t immediately erase $50,000 in student loans for each borrower.
The American Rescue Plan, signed into law last week, makes all student loan forgiveness taxfree until 2025, including private and institutional loans. The move helps current borrowers who receive loan forgiveness during this period and sets the stage for Biden to wipe away thousands of dollars in student debt.
Schumer and sens. Elizabeth Warren, D-mass., and Bob Menendez, D-N.J., held a press conference Monday to again push Biden to wipe away student debt.
“The provision would apply to nearly 100,000 students who are already in repayment programs that offer some student loan forgiveness, but even more importantly and crucially, it would apply to future efforts to forgive student loans,” Schumer said. “Making student debt cancellation tax-free clears the way for the Biden administration to cancel $50,000 in student loan through executive action.”
Biden has not edged away from the senators’ pressure, opting for a narrower proposal. He has supported canceling $10,000 of student loan debt for all borrowers and the rest of the debt for people who went to public or historically Black colleges and universities and earn less than $125,000 a year. The
U.S. Department of Justice is conducting a legal review on how to use executive authority to do so, the senators said.
Biden has already used executive action to extend a pause for federal student loan borrowers until at least October, giving borrowers a break from payments and accruing interest.
When the federal government or a lender forgives a student loan under certain plans, that canceled debt may be treated as taxable income under federal tax laws, leaving some students with an unexpected bill. In many states, the money is also subject to state income taxes.
“The average student borrower who earns $50,000 in income would save approximately $2,200 in taxes for every $10,000 of forgiven student loans,” said Warren.
It’s unclear how much annual revenue the federal government would lose due to this temporary change. Waiving thousands of dollars of student debt per person would come at a much greater cost to federal coffers.
Already, the $1.9 trillion American Rescue Plan, Biden’s signature COVID-19 relief package, is expected to decrease federal revenues by $53 billion over the next 10 years and increase direct spending by $1.8 trillion, according to the nonpartisan Congressional Budget Office.
New Yorkers have the fifth highest collective student loan balance for borrowers of any state, according to the state comptroller’s office.
New Yorkers’ average student loan balance rose by 3.9 percent from the previous year to $37,600 as of last June, according to data from the Federal Reserve Bank of New York. That figure has increased 20.1 percent since 2016. From 2006 to 2016, student loan debt more than doubled in New York.
Canceling student loan debt is part of a larger conversation about the affordability of college as tuition climbs. Many conservatives have blasted the idea of spending billions to wipe out student loan debt, saying that if people choose to go to college, they need to shoulder the burden of higher education.
The Republicans’ ranking members of the Senate and House education committees did not respond to requests for comment Monday.
Rachel Gentry, assistant director of federal relations at the National Association of Student Financial Aid Administrators, previously said that her organization has recommended that Congress “explore debt forgiveness options that are targeted to borrowers with the greatest need.”
But she also emphasized the need to double the maximum Pell grant, which now is $6,345, because the money does not need to be repaid.