Cancel $ 50,000 in student loan debt
A new proposal would write off up to $ 50,000 of your student loan debt.
Here’s what you need to know.
Could you get up to $ 50,000 in student loan forgiveness? It may look like another student loan proposal, but it’s the person behind the proposal who may make you think twice. Dr. A. Wayne Johnson, who effectively ran the federal student loan program at the US Department of Education during the Trump administration, has several recommendations on how to improve student loans. Johnson, who is now a candidate for the U.S. Senate from Georgia and not an elected official, shared his views with Senate Majority Leader Mitch McConnell (R-KY) and Senate Minority Leader Chuck Schumer (D -NY) in a letter. Here are his five key recommendations for your student loans, and what he thinks should be included in the next stimulus plan:
1. Suspend student loan payments until December 31, 2021
Johnson would suspend all federal student loan payments, including any accumulation of interest, until December 31, 2021. Johnson’s proposal is more “aggressive” than current Republicans and Democrats’ proposals. In the Heroes Act, for example, Democrats said federal student loan payments should be suspended until March 31, 2021. President Donald Trump suspension of federal student loan payments until December 31, 2020. Therefore, Johnson would extend the student loan payment break by one year longer than Trump and nine months longer than Democrats. Johnson wrote that “people need more time to plan their lives.” Until December 31, 2021, Johnson would also suspend collection of delinquent federal student loans as well as wage garnishments, Social Security payments and income tax refunds. Like the Cares Act – the $ 2.2 trillion stimulus package that Congress passed in March – Johnson would count any “non-payment” of federal student loan debt during that period in the 120 required monthly payments. for the Public service loan forgiveness program.
2. Cancel student loan debt in bankruptcy
Johnson says that all student loan debt, including federal student loans and private student loans, should be dischargeable in bankruptcy. Today, unlike mortgage debt or credit card debt, it’s difficult (but not impossible) to write off student loan debt in bankruptcy. Typically, a legal standard requires borrowers to prove they are in undue financial hardship in order for their student loans to be canceled in bankruptcy. Johnson says Congress should allow student loan borrowers to pay off their student loans without undue hardship. However, Johnson notes that borrowers must have held student loan debt for at least 10 years before they can pay off their student loans. Joe Biden, the alleged Democratic presidential candidate, now supports that allow borrowers to free themselves from their student loans in the event of bankruptcy.
3. Write off $ 50,000 in student loan debt
With the exception of the student loan bankruptcy proposal, Johnson does not support student loan forgiveness in the next stimulus plan. Johnson writes that any cancellation of student loan debt, beyond bankruptcy, “would be haphazard and irresponsible if enacted autonomously or reactionary.” However, before December 31, 2021, Johnson believes that:
- Congress is expected to write off up to $ 1 trillion in federal student debt.
- The cancellation of student loan debt would be part of a “Grand Bargain” that “abolishes” the current federal student loan program.
- The current federal student loan program should be replaced with an “Enhanced Federal Student Scholarship Program – A More Opportunity Plan for Higher Education.”
- Each high school graduate is expected to receive an Opportunity Plus scholarship of $ 50,000 to use for vocational training or undergraduate higher education.
- A federal revenue sharing agreement would be implemented for graduate students.
- Federal student loan debt of up to $ 50,000 would be forgiven for each borrower, at an amount equal to the scholarship.
- If you don’t have student loan debt, you would be eligible for an income tax credit of up to $ 50,000.
Johnson said his plan would write off about $ 1 trillion in federal student debt and eliminate student debt for 35 million Americans.
4. Impose a 1% tax on all corporations
Johnson would pay for his student loan debt proposal by imposing a 1% tax on turnover (rather than on the profits) of all corporations, including for-profit and not-for-profit corporations, including colleges and universities. Johnson says his plan would provide $ 225 billion annually, which he said would cover student debt cancellation and fund higher education programs.
5. Remove student loan debt from credit reports
Johnson would remove your federal student loan debt from your credit reports at all credit bureaus. Why? Johnson says the current student loan system has “created inaccurate and unfair credit bureaus reports.” By removing this credit information, Johnson believes more Americans can borrow money at lower interest rates. Johnson also says that student loan borrowers who are enrolled in an income-based repayment plan would not have “their credit report … reporting information interpreted as negative.”
How to repay student loans
Currently, the next stimulus package should not include any of these student loan proposals. That said, Congress could take these proposals into account in future legislation. For example, there has been bipartisan support for canceling student loan debt in bankruptcy. In the meantime, make sure you have a game plan for pay off student loans. What’s the best way to start? Start with these four options, all free: