After cancellation, Democrats seek to reduce future student debt


WASHINGTON (AP) — Building on President Joe Biden’s Student Debt Cancellation PlanHouse Democrats on Thursday proposed new legislation that would increase federal student aid, cut interest rates on loans and take other steps to make college more affordable.

The bill is billed as an add-on to Biden’s plan, which promises to wipe out student debt for millions of Americans but does little to help prospective students avoid heavy debt. Democrats say their plan would tackle the root causes of the $1.6 trillion federal student debt in the United States.

“Simply put, by making loans cheaper to take out and easier to repay, the Loans Act will help improve the lives of student borrowers – both now and in the future,” Rep. Bobby Scott said. , D-Va., Chairman of the House Education and Labor Committee.

But like Biden’s loan forgiveness plan, the proposed legislation does not address the rising cost of college itself, which has continued to rise for decades.

The election season bill has a slim chance of passing the House and virtually no hope in the Senate, where Democrats hold a slim 50-50 advantage and Republican votes would be needed even to pass the bill. . Yet he spells out Democratic priorities as both parties pledge to tackle the country’s growing student debt.

Much of the proposal focuses on expanding Federal Pell Grants, which are given to low-income students, but have failed to keep pace with inflation and tuition fees. When the Pell program was launched in the 1970s, the grants covered nearly 80% of tuition, fees and housing at a typical public university, according to federal data. Today, they cover about a quarter of these costs.

The legislation would double Pell’s maximum grant, to $13,000, over a five-year period and then ensure it remains equal to inflation. Families who receive food stamps or Medicaid would automatically receive an additional $1,500 per year. And students could use Pell Grants for up to 18 semesters, up from 12 currently.

More than 40 million Americans could see their student loan debt reduced under President Joe Biden’s long-awaited forgiveness plan. (CNN)

Interest rates on new federal student loans would be lowered beginning in July 2023 to match the yield on the 10-year Treasury bill, and all federal student loans would be capped at a 5% interest rate. Current limits vary by loan type, but can be as high as 10.5%. Older loans could be refinanced at lower interest rates.

Democrats are also aiming to permanently relax the rules of the Civil Service Loan Cancellation Programwhich was created to help civil servants obtain cancellation of their student debt, but which was marred by complex rules.

The proposal would allow civil servants to get debt forgiveness after making 96 monthly payments, up from 120, and it would allow certain periods of non-payment to count, including military service or time in the Peace Corps . The Ministry of Education recently relaxed some rules during the pandemic, but the changes are due to expire at the end of October.

Several of the bill’s components are perennial aspirations for Democrats, who have long sought to increase Pell grants and fix the loan forgiveness program. But those goals have been thwarted by a deeply divided Congress — Biden has repeatedly sought to double the Pell grants, but had to settle for a $400 increase this year as part of a bipartisan budget bill.

House Republicans unveiled their own student loan proposal in August, seeking to cut loans — especially for expensive graduate programs — and limit debt forgiveness.

The Republican legislation would eliminate the Civil Service Loan Forgiveness Program entirely and allow students to borrow a maximum of $100,000 in federal student debt for graduate school, up from an existing cap of $138,500. Additionally, it would allow students to use Pell Grants for short-term programs focused on vocational training.

In a direct shot at the Biden administration, the GOP bill also sought to limit the education secretary’s ability to forgive student debt.

Biden’s cancellation plan, announced last month, promises to cancel $10,000 in federal student debt for people with incomes below $125,000 a year or families below $250,000. Those who received Pell Grants to attend college receive an additional $10,000.

The Ministry of Education says an application will be available in early October. Whether borrowers actually see the relief depends on whether the plan survives legal challenges who are almost certain to come.

Although the general details of the plan have been available for weeks, many students in debt are wondering exactly how it will be implemented.

Long before Biden announced his plan, the Department of Education said borrowers could get refunds for payments made during the pandemic. But could borrowers cancel these payments and then request debt forgiveness? Officials said nothing, confusing what borrowers should do.

Answers began to emerge this week as the Education Department quietly updated a website with details of the plan.

According to the agency, borrowers who made payments during the pandemic will automatically have that money back if they request Biden’s cancellation — but only if their previous payments left them with a loan balance below $10,000 or $20,000 they get canceled.

The ministry offers an example: If someone is eligible for a $10,000 reversal but makes a $1,000 payment leaving their balance at $9,500, they will get a $500 refund.

Borrowers who repaid their loans during the pause will first need to request a refund and then request cancellation, the department said.

Many Democrats applauded Biden’s plan, but some said he did little to prevent future students from going into debt. Even Biden’s education secretary, Miguel Cardona, acknowledged the limited scope of one-time debt cancellation.

Speaking to reporters last week, Cardona said it would be “short-sighted” to think the cancellation will solve the student debt problem.

Instead, Cardona drew attention to a new, more generous loan repayment plan that was unveiled alongside the cancellation. Under this proposal, borrowers’ monthly bills would be capped at 5% of their income, up from 10% currently, and any remaining balance would be canceled after 10 years, up from 20 years currently.

“It’s not as flashy,” Cardona said of the payback plan, “but it has a generational impact.”

Democratic lawmakers agree that cancellation is only part of the solution. Rep. Frederica Wilson, D-Fla., sponsor of the new bill, said it’s up to Congress to make sure borrowers are out of debt, especially students of color who are more likely to borrow debts and struggle to repay them. .

“This legislation brings together some of the most forward-thinking and innovative proposals into one comprehensive proposal so that this generation will be the last to experience the student debt crisis in the United States,” Wilson said.


To learn more about AP’s student loan coverage, go to


The Associated Press education team receives support from the Carnegie Corporation of New York. The AP is solely responsible for all content.


Comments are closed.