BETA
This is a BETA experience. You may opt-out by clicking here

More From Forbes

Edit Story

There Are Now Five Plans To Forgive Student Loans — How Do They Compare?

Following
This article is more than 3 years old.

As the economy continues to suffer during the COVID-19 pandemic, lawmakers are increasingly aware that repaying student loans is becoming difficult or impossible for millions of student loan borrowers.

The protections provided by the CARES Act, while important, only provide temporary relief (in the form of suspended interest, payments, and collections). Consumer advocates are concerned that borrowers will be in no position to repay their student loans once that temporary program expires.

As a result, lawmakers are putting forward proposal after proposal to permanently forgive student loan debt. But every bill that has been offered so far has been very different. As a result, it can be challenging for student loan borrowers to keep track of such a rapidly developing situation.

Here’s a breakdown of the five major student loan forgiveness proposals so far.

Relief for Essential Workers

This proposal would provide student loan forgiveness and other relief to “essential workers.” The bill is called the Opportunity for Heroes Act, sponsored by Rep. Ann Kuster (D-NH). Here’s how it works.

  • Essential workers would be given $25,000 towards student loan forgiveness.
  • Alternatively, eligible workers could also use the funds towards college tuition, continuing education, or vocational training.
  • “Essential workers” would include healthcare workers, first responders, pharmacy workers, grocery store workers, and postal workers, among other professions.
  • Federal and private student loans would be eligible for forgiveness.
  • The award would not be taxed as income.

Relief for Medical Workers

This bill would provide student loan forgiveness to front-line medical workers. The bill, sponsored by Rep. Carolyn Maloney (D-N.Y), is called the “Student Loan Forgiveness for Frontline Healthcare Workers Act.” Here’s what it would do:

  • All federal and private student loans would be forgiven for medical workers who are caring for patients suffering from COVID-19. There is no cap on student loan forgiveness.
  • Doctors, nurses, aids, medical residents, interns, technicians, and researchers would be eligible.
  • The forgiven student loan balance would not be treated as “taxable income” to the borrower.

Universal Student Loan Forgiveness (Senate Version)

Democratic senators have been pushing for across-the-board student loan forgiveness. Their plan includes these details:

  • The government would pay up to $10,000 in regular student loan payments on behalf of borrowers.
  • Only Direct federal student loans and FFEL-program loans would be eligible. Private loans would not be eligible.
  • The $10,000 would not be treated as “taxable income” to the borrower.

Democratic senators were unsuccessful in getting these terms included in the CARES Act, but they are still pushing for similar relief for borrowers.

Universal Student Loan Forgiveness (House Version)

This bill, called the Student Debt Emergency Relief Act, would provide across-the-board student loan forgiveness. Sponsored by Congresswomen Ayanna Pressley and Ilhan Omar, this proposal goes much further than the Senate’s:

  • $30,000 in federal student loans would be forgiven. Private student loans would not be eligible.
  • The $30,000 would not be treated as “taxable income” to the borrower.
  • For student loan borrowers who continue to have student loan payments due even after the $30,000 in cancellation, the government would assume their monthly payments during the duration of the national emergency so borrowers can remain on track for loan forgiveness programs or loan payoff.

Biden’s Student Loan Forgiveness Plan

Former Vice President Joe Biden, the presumptive Democratic nominee for president, has come out with his own plan for student loan forgiveness. But his plan differs from the others in key ways.

  • Biden’s proposal would forgive all undergraduate federal student loan debt for certain borrowers. Typically, undergraduate federal student loan debt averages just under $40,000, although in some cases it can be nearly $60,000. Student loans for graduate programs would not be covered, and neither would private student loans.
  • Eligibility would be limited to borrowers who attended public colleges and universities, as well as historically black colleges and universities (HBCUs) and private minority-serving institutions (MSIs). Borrowers who attended traditional private colleges and universities that don’t meet this criteria would not be eligible.
  • Eligibility would be further limited to borrowers who earn an income of less than $125,000 per year. Borrowers who earn in excess of that limit would not be eligible for loan forgiveness.

Takeaways

Here are some key takeaways about the above proposals:

Does the plan have a cap on student loan forgiveness?

  • Opportunities for Heroes Act (Essential Workers): YES
  • Student Loan Forgiveness for Frontline Healthcare Workers Act: NO
  • Senate plan: YES
  • Student Debt Emergency Relief Act: YES
  • Biden’s plan: YES

Does the plan restrict eligibility to certain professions?

  • Opportunities for Heroes Act (Essential Workers): YES
  • Student Loan Forgiveness for Frontline Healthcare Workers Act: YES
  • Senate plan: NO
  • Student Debt Emergency Relief Act: NO
  • Biden’s plan: NO

Does the plan restrict eligibility based on income?

  • Opportunities for Heroes Act (Essential Workers): NO
  • Student Loan Forgiveness for Frontline Healthcare Workers Act: NO
  • Senate plan: NO
  • Student Debt Emergency Relief Act: NO
  • Biden’s plan: YES

Does the plan cover private student loans, as well as federal?

  • Opportunities for Heroes Act (Essential Workers): YES
  • Student Loan Forgiveness for Frontline Healthcare Workers Act: YES
  • Senate plan: NO
  • Student Debt Emergency Relief Act: NO
  • Biden’s plan: NO

And perhaps the biggest takeaway is this: no single proposal has, so far, garnered enough support to pass both houses of Congress and be signed into law by the President. This is a rapidly evolving situation, though, so stay tuned.

Follow me on Twitter or LinkedInCheck out my website