Texas Congressman Vicente Gonzalez (TX-15) introduced a bill to cancel $25,000 of student debt for all federal borrowers.
The bill is estimated to provide $775.5 billion in debt relief for over 45.4 million Americans.
For student loan borrowers, the Student Loan Relief Bill is welcome news. Even if it doesn’t pass, it is a positive step forward.
Student Loan Relief Bill Details
Congressman Gonzalez has proposed that $25,000 of debt be removed from every federal student loan balance. For borrowers with larger balances, the debt with the highest interest rate gets forgiven first.
The forgiveness would apply to all federally-held loans and federally guaranteed loans, such as FFEL Loans. The initial draft of the bill does not include any limitations based upon borrower income.
The bill language also states that any debt forgiven would not be considered taxable income.
Chances of Passage
Unfortunately for borrowers, this particular bill looks like a long shot.
Congressman Gonzalez previously introduced this exact legislation at the start of the pandemic, and it received very little attention.
Additionally, there are no cosponsors to the bill, nor has companion legislation been introduced in the Senate.
The biggest challenge for any student loan forgiveness legislation is currently the Senate. With Republicans, thus far, uniformly opposed to student loan cancellation, getting the 60 votes necessary to pass appears highly unlikely.
Could President Biden Cancel the Debt? The authority of the President to cancel student loans is a much-debated legal question.
My read of the situation is that President Biden is unlikely to issue an executive order on forgiveness-for-all.
How to Plan for Forgiveness
Even though this particular bill may not become law, the possibility of forgiveness still exists.
For borrowers, the situation is complicated. If you aggressively pay off your federal loans now, you could miss out on forgiveness if it happens. However, if you just hope for forgiveness, you could spend far more than necessary on interest.
I’ve previously covered the strategy on planning for forgiveness in more detail, but the short version is that the possibility of forgiveness probably means borrowers should focus on debt unlikely to be forgiven, such as private loans.
The Benefits Even if the Student Loan Relief Bill Fails
A decade ago, the idea of canceling all borrowers’ student loans was rarely ever discussed or suggested. Today, it is a very mainstream position supported by many prominent Democrats.
Additionally, support among voters continues to grow. One recent poll showed that 60% of voters support some form of student loan forgiveness.
Even if the bill doesn’t pass, getting a vote would be huge. Any member of Congress who votes against forgiveness would have to explain their opposition to the popular and helpful legislation.
How to Support the Bill
As voters, we can have a considerable influence over how our elected representatives vote.
Take a few moments to contact your representative in Congress to express support for the Student Loan Relief Bill proposed by Congressman Gonzalez.
When there is extensive support for a bill, it may cause many politicians to reconsider their position. They may decide that coming out strongly in favor of forgiveness helps their chances of getting elected. At a minimum, they may decide that opposing loan forgiveness is a risky move.