Democrats Propose 5 Changes to Student Loan Cancellation


Congressional Democrats have proposed 5 changes to abolish student loans.

Here’s what you need to know – and what does it mean for student loans

Student loans

IN letter US Education Secretary Miguel Cardone was proposed by a group of progressive Democrats, including Senate Majority Leader Chuck Schumer (New York State) and Senator Elizabeth Warren (Massachusetts), four changes to student loan repayment and cancellation. Here are their 5 main suggestions:

1. Make a new student loan repayment plan like this

Income-driven repayment plans are helping millions of student loan borrowers, but they are too complex. Rather than have multiple income-based repayment plans that can confuse student loan borrowers, the Department of Education should create a new income-oriented repayment plan available to all current and future student loan borrowers. According to the new federal student loan repayment plan for student loans:

  • student loan payments will be limited to no more than 10% of discretionary income;
  • student loan repayment for a period not exceeding 20 years;
  • student loan forgiveness after 20 years;
  • student loan borrowers should be able to “prioritize living expenses” before repaying the student loan;
  • student loan interest should not accumulate faster than student loan borrowers can repay their student loans (“no negative depreciation”);
  • existing student loan borrowers should be automatically transferred to this new unified student loan repayment plan; as well as
  • new student loan borrowers should be able to register seamlessly with easy exchange of tax information to reduce red tape.

2. Student Loan Cancellation: Protect the borrower by the repayment rule of all federal student loans.

Members of Congress say it should be easier to get student loan canceled for borrowers who cheated on their schools, including predatory commercial colleges. They argue that under the Trump administration, the standard has become onerous for borrowers to prove that their colleges have harmed them and made it difficult to cancel a student loan. Instead, they want:

  • establish consistent, fair and impartial rules for the protection of borrowers;
  • applies to all current, future, and former borrowers of federal student loans;
  • Cancellation of a student loan altogether should be a presumption and not an exception to the rule;
  • any federal student loan borrower who has been the victim of “illegal, unfair, misleading, or abusive higher education” must obtain a student loan cancellation;
  • where possible, student loan borrowers do not need to apply for student loan cancellation;
  • no statute of limitations for student loan cancellations;
  • no coercive arbitration agreements or class action restrictions;
  • states should assist student loan borrowers in obtaining additional student loan benefits where possible;

3. Provide automatic cancellation of student loan at college closure.

When a college closes without warning, it can have devastating consequences for graduate students. Democrats want the following:

  • provide automatic student loan cancellation for federal student loan at college closure;
  • cancellation of a student loan without submitting an application;
  • remove the restriction prohibiting the cancellation of a student loan when transferring to another college;
  • automatic cancellation of a student loan within 90 days of college closing;
  • student loan cancellation must happen quickly so that student loan borrowers can afford to go to the next college;
  • If a student leaves a school that shows warning signs of closure, the Department of Education must establish a 180-day review period that allows the student to cancel the student loan even if the student was not at school at the time the school closed.

4. Automatic student loan cancellation for student loan borrowers with disabilities.

Democrats want to leverage the ways that student loan borrowers with disabilities can obtain student loan cancellations. For example, they suggest:

  • remove the requirement to apply for student loan cancellation for federal student loans;
  • remove the requirement for a “monitoring period” of potential revenues;
  • the student loan must be paid off within 90 days of receiving notice from the US Department of Veterans Affairs or the US Social Security Administration;
  • change the definition of “total and permanent disability” to determine if there are other student loan borrowers who are disabled but still unable to work and should be eligible for student loan cancellation;
  • determine if there are student loan borrowers with disabilities who should be eligible for student loan cancellation;

5. More student loan borrowers should be eligible for student loan forgiveness.

Signatories are calling for changes to the student loan forgiveness program for the public service loan forgiveness program, including:

  • student loan advances and student loan lump sum payments must be considered qualifying student loan payments;
  • the form for the employment certificate and student loan forgiveness should be streamlined into a single form;
  • when student loan borrowers pool student loans, their student loan payments should not be flushed;
  • deferral due to economic hardship or deferral from military service should count towards student loan qualification payments for student loan forgiveness;
  • working for multiple employers for at least 30 hours per week must be eligible for student loan forgiveness;
  • create rules for employers who refuse to sign an employer certification form;
  • Borrowers who have been approved to pay student loan qualifying payments should not be penalized if the error was made by Student Loan Services or the US Department of Education;
  • establish a clear appeal procedure for any student loan borrower who is denied loan forgiveness; as well as
  • and establish greater communication between federal agencies, such as the US Department of Defense.

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