House Democrats Reduce Student Debt Cancellation In Heroes Act
Just two days after the release of the Heroes Act, House Democrats have published an amendment to the invoice. The original bill provided for $ 10,000 in student loan cancellation for all borrowers and suspension of student loan payments until September 30, 2021. This new amendment reduces the proposed student loan exemption.
The Manager’s Amendment to the Heroes Act amends the bill to include a more targeted student debt cancellation proposal, presumably for cost reduction purposes. Instead of a general pardon of $ 10,000, it would focus on borrowers who were already in distress before the coronavirus crisis.
Democrats chose to focus on “economically troubled borrowers” with forgiveness, offering a $ 10,000 write-off to those borrowers. According to the legislation, a borrower in economic difficulty is one who, on March 12, 2020:
- Had a monthly income-tested or income-tested repayment payment of $ 0;
- was in default on his student loans;
- was at least 90 days past due; Where
- Whose payments are suspended under existing forbearance options, such as economic hardship, unemployment or cancer.
This targeted approach would bring great relief to borrowers struggling before the coronavirus by definition. But not only would that direct relief to those struggling the most, it would wipe out the balance for most of those borrowers.
The typical portrayal of a student loan borrower is drowning in six-figure student debt, but that’s not really the case. Borrowers who struggle to keep their heads above water tend to be those with smaller balances. For example, two-thirds of defaulted students owe less than $ 10,000. In fact, the median student debt in default is only $ 9,600.
But this new proposal will not fail to cause discontent. Earlier this week, Senator Elizabeth Warren tweeted that she was happy to see a $ 10,000 debt cancellation proposal included in the bill. She and other advocates will likely see this as a step backwards.
The amendment may not retain the general remission, but it maintains the suspension of the student loan payment as proposed in the original Heroes Act. This would provide major assistance to struggling borrowers throughout the crisis, while targeting cancellation on those who need it most.