A new legislative proposal would cancel your student loan debt if you can show income loss due to Coroanvirus.
Here’s what you need to know.
Sens. Sheldon Whitehouse (D-RI) and Sherrod Brown (D-OH) want to cancel student loan debt for any borrower who either lost income due to Covid-19 or if they have significant medical debt over the past three years. The senators’ bill, which is called the Medical Bankruptcy Fairness Act, would allow you to cancel your student loans in bankruptcy and provide relief to student loan borrowers who are struggling to make student loan payments. Unlike mortgages or credit card debt, it’s relatively difficult to cancel student loans in bankruptcy. However, borrowers have been in successful to cancel student loans in bankruptcy by demonstrating that their student loans cause an “undue hardship.” This new legislation, if passed in Congress, would help ease the path to cancel student loan debt.
Cancel student loan debt
This is not the first time that Democrats in Congress have proposed to cancel student loan debt. For example, Sen. Elizabeth Warren (D-MA) and Sen. Dick Durbin (D-IL) have been pushing for similar legislation for a good part of the last decade. For example, in 2014 and 2016, the senators proposed similar legislation under the same bill name. The legislation has now been updated to include the possibility to cancel student loan debt due to income loss from Coronavirus. Warren, in particular, has been at the forefront to cancel student loan debt. During her presidential campaign, and in Congress, Warren proposed to cancel student loan debt for 95% of Americans. Student Debt Crisis, a leading student loan advocacy not-profit, recently sent Sen. Elizabeth Warren (D-MA) a petition for student loan forgiveness with 1.2 million signatures.
There have been multiple proposals to cancel student loan debt from legislators and presidential candidates alike:
Other members of Congress have proposed legislation to forgive student loans, although none have become law.
Will student loans get cancelled?
There is bipartisan support to make student loans dischargeable in bankruptcy, but there may not be consensus to act until after the election in the next Congress. Many student loan borrowers want to know whether there will be student loan forgiveness in the new stimulus package. Don’t expect student loan forgiveness to be included. Student loan forgiveness has not been the focus of the new stimulus package. Senate Republicans, who control the Senate, are expected to announce their new stimulus package Monday. Congress may extend student loan relief under the Cares Act, or Congress could allow the student loan relief to expire as planned on September 30, 2020. However, Congress is more focused currently on second stimulus checks, unemployment benefits, school openings and getting people back to work.
How to pay off student loans
Make sure you have a game plan to pay off student loans. Start with these four options, all of which have no fees: