LOS ANGELES – The American rescue plan that the White House is announcing nationwide on its “Help is Here” tour contains a provision that all student loans by the federal government should be tax-free by 2025.
This legislation was spearheaded by Jimmy Gomez, the Democratic representative of Los Angeles, and Bill Pascrell, the representative of New Jersey, and would ensure that a potential federal loan grant granted by Congress or the President does not include taxes – which is not surprising to Americans Tax charges mean when debts have been canceled.
What you need to know
- The COVID-19 aid plan contains a provision according to which the granting of federal student loans is tax-free until 2025
- This comes as no surprise to Americans if the student loan debt should be canceled
- Rep Jimmy Gomez says the growing industry is “crippling graduates,” especially first-generation students and people with color
- The Biden government is currently examining how the president can handle student loans with executive power
Gomez pointed out that student loan debt is a trillion dollar industry that continues to grow and, in turn, “cripples” graduates, especially first-generation students and people of color.
“As someone who has owed $ 45,000 in student loan debt since my graduate school in 2003 and I’m still working to repay that, student loan termination is a big problem,” said Gomez.
Senator Elizabeth Warren, D-MA, sponsored the Senate version of this law, among other things. Warren said this provision, now enshrined in the pandemic relief plan, “paves the way for $ 50,000 in student loan debt to be canceled.”
She added that wiping out credit debt can help boost the economy and help American minorities who may be disproportionately hurt by the debt crisis and pandemic. Warren and Gomez said now is the time to make student loan forgiveness a reality.
“I’ve heard stories that people in my district owe $ 209,000 and someone else owe $ 175,000,” Gomez said. “I had a forum on the subject, and it’s one of the main topics because it prevents people from saving money, buying a house, raising a family and really fueling their future. I take pride in this bill, what it does is that if there is any lending it will be tax free because prior to this bill, anyone who received a cancellation would be taxed as income. So you would help them on the one hand and punish them on the other. “
President Biden has expressed his support for the $ 10,000 worth of loans, though he would like it to be done with the support of both parties in Congress – although there is no Republican support in this issue. Because of that lack of GOP support, Warren said Biden should use his executive powers to cancel billions of dollars worth of student debt. The government said it was examining what power the president could use on the matter.
With instructions and actions from the executive branch, the president is generally unable to enact new laws or guidelines. However, there may be a way the president can regulate student loans through a vague Congressional provision in the Higher Education Act that gives the Minister of Education the authority to provide relief to student debtors, but the extent to which it is not clear. If the president decided to sign an order that would cost the US Treasury Department billions of dollars, it would almost certainly be challenged in court.
However, the Democrats hope that critics will no longer be able to point out a possible tax burden on student loan issuance and that many affected by the debt crisis and pandemic would benefit from loan issuance.