For college students taking on enormous debt, relief could be on the way for millions of borrowers who have taken out student loans.
Legislation filed in Congress this week would allow a one-time cancellation of outstanding federal loan debt by up to $50,000 for each borrower, including student loans that have been in default.
The maximum $50,000 would apply to borrowers with household incomes of less than $100,000, according to the legislation filed by U.S. Senator Elizabeth Warren, a Massachusetts Democrat and 2020 presidential candidate, and House Majority Whip James E. Clyburn, a Democrat from South Carolina.
For those with higher household incomes, the amount of debt discharged would be reduced by $1 for every $3 in income above $100,000.
Warren has long made the student loan crisis a priority.
“My very first bill when I got to the Senate was legislation to tackle the growing student debt crisis because I was sick of Washington allowing the wealthy to pay less, while burying tens of millions of Americans in mountains of student loan debt,” Warren said in statement.
“Since then, Washington has only allowed this crisis to get worse-especially for people of color. Enough is enough. Congressman Clyburn and I have a bill to cancel student debt for millions of Americans and finally end this crisis.”
The legislation also, for a certain time, would put a freeze on debt collection methods such as garnishing wages, and would restore the ability to discharge student loan debt in bankruptcy.
The student loans that would be discharged are federal loans, including Federal Family Education Loans, Federal Direct Student Loans , Parent and Grad PLUS Loans, and Federal Perkins Loans.
For borrowers taking out private loans, there’s an avenue to get student debt discharged. They’ll have an opportunity to voluntarily refinance their private loans to Federal Direct Student Loans, allowing private student loan borrowers to qualify for loan cancellation.