The Debt Collection Accountability Act seeks to curb ‘blanket’ student loan cancellation of large amounts of federal student loan debt.
06/30/2022 9:00 A.M.
3.5 minute read
One of the many recent legislative proposals related to student loan cancellation on Capitol Hill is focusing on requiring congressional approval if the U.S. Department of Education proposes to waive, discharge or reduce student debt.
The Debt Cancellation Accountability Act (S.4483), co-sponsored by U.S. Sens. Rick Scott, R-Fla., Cynthia Lummis, R-Wy., Mike Braun, R-Ind., and John Barrasso, R-Wy., “will require the U.S. Department of Education to obtain an express appropriation from Congress to pay for any federal student loan debts the Department proposes to waive, discharge, or otherwise reduce whenever granted to two or more borrowers in an amount greater than $1,000,000, rather than on a case-by-case basis,” according to a news release from Scott’s office.
Scott said “blanket forgiveness of student loans only benefits a small percentage of the population at the expense of millions of other hardworking Americans.”
Meanwhile, another proposal from bipartisan Senate leaders—the Student Loan Accountability Act—would enact similar prohibitions for the DOE as well as the Department of Justice and Department of the Treasury. Those departments would be prohibited from “taking any action to cancel or forgive the outstanding balances, or portions of balances, for covered loans,” according to a news release from the bill’s sponsors, U.S. Sens. Mitt Romney, R-Utah, Richard Burr, R-N.C., Tim Scott, R-S.C., Bill Cassidy, R-La., and Thom Tillis, R-N.C.
The bill, however, “includes exemptions for existing targeted federal student loan forgiveness, cancellation, or repayment programs currently in effect under the Higher Education Act, such as the Public Service Loan Forgiveness and Teacher Loan Forgiveness programs,” according to the news release.
The bills may not advance given the Democratic majority in the House and Senate but show the Republicans’ priorities if they regain control in either chamber after the midterm elections this fall, according to a report from Politico.
Student Loan Relief
There are also several other bills on Capitol Hill seeking student loan relief and student loan cancellation, Forbes reports.
- Consumer advocates say President Joe Biden has the authority to forgive student loan debt through executive action and is supporting loan forgiveness of more than $50,000 per borrower.
- Biden’s 2020 campaign included support for student loan forgiveness, such as a fixed amount of cancelled debt per borrower and a proposed program to stop debt for undergraduates with federal student loans and “incomes under $125,000 per year who attended public institutions or historically Black colleges and universities (HBCUs) and private minority-serving institutions (MSIs).”
- Last year, Biden switched gears and said he was against cancelling $50,000 in student loans per borrower and supported instead $10,000 in “broad student loan forgiveness.” He also showed uncertainty about his executive authority to cancel student debt over signing legislation passed in Congress, which he supports.
- The Biden administration has, in the meantime, adopted targeted tactics for student loan forgiveness through changes to requirements for federal student loan programs, such as the Borrower to Defense Repayment Program and Public Service Loan Forgiveness Program.
A report from the Brookings Institution argues that targeted debt relief policies can “reduce injustices in student loans” and broad student loan debt relief is regressive, ACA International previously reported.
The Senate Committee on Banking, Housing and Urban Affairs held a hearing May 5 to examine the student loan servicing industry and its impact on workers with witnesses representing student borrowers, non-partisan public policy groups and research organizations
ACA submitted a letter to the committee leaders before the hearing outlining concerns with blanket student loan forgiveness policies and the impact on borrowers and the credit-based economy.
The bottom line for ACA is that sweeping actions related to student loans that make no distinction for consumers—many who have professional degrees and can afford their student loan bills—are concerning.
“ACA supports an increased focus on education and financial literacy, particularly for younger people, and all efforts to help consumers better understand early steps they can take to avoid breaching contractual financial obligations,” said ACA CEO Scott Purcell.
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