Sen. Elizabeth Warren introduced a bill Tuesday that would forgive student loans for tens of millions of Americans. Three-quarters of borrowers would have their balances reset to zero. - CNBC
Education debt in the U.S. has eclipsed credit card and auto debt. Today the average college graduate leaves school $30,000 in the red, up from $10,000 in the 1990s, and 28% of student loan borrowers are in delinquency or default.
Under Warren's proposal, introduced along with Rep. James E. Clyburn, D-S.C., borrowers with household incomes under $100,000 would get $50,000 of their student debt forgiven. People who earn between $100,000 and $250,000 would be eligible for forgiveness on a sliding scale – the cancellation amount reduces by $1 for every $3 a person earns over $100,000. And those who earn more than $250,000 would not get any debt relief.
The degree of debt forgiveness a person receives would be determined by their income in the most recent tax year. The loan cancellations would take about a year from the time the bill is enacted to complete. No paperwork will be required as the cancellations would be carried out automatically through information sharing between the Treasury Department, the Internal Revenue Service and the Department of Education.
If a borrower has multiple loans, the Department of Education will void the loan with either the highest interest rate or outstanding balance.Any forgiven debt would not be considered taxable income. Those with private student loans would be given the option to convert them into federal loans.
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