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President Biden said yesterday that he agrees with a proposal from House Democrats to begin phasing out the next round of direct coronavirus relief payments to Americans who make more than $75,000, a key sticking point among some in the party, The Hill reported. Biden signaled his support for the threshold during a meeting with the heads of several major corporations in the Oval Office. He hosted the business leaders to solicit buy-in on his $1.9 trillion relief proposal as well as to discuss future economic measures such as an infrastructure package and an increase to the minimum wage. Biden was joined in the Oval Office by Vice President Harris and Treasury Secretary Janet Yellen. The meeting comes as the White House and congressional Democrats work to push through Biden's economic relief package, which would send direct payments to millions of Americans, provide funding for schools as well as state and local governments, and boost money for vaccine distribution. House Democrats on Monday night released key portions of their coronavirus relief bill. The proposal called for direct payments of $1,400 to single taxpayers with annual income up to $75,000 and married couples that make up to $150,000.

Democrats are calling on President Biden to use the pandemic to cancel $50,000 in student debt per borrower. What many people forget is that in 2010 they used the last recession to justify a federal takeover of student loans that have since more than doubled to $1.6 trillion, according to a Wall Street Journal editorial. Now they’re using the pandemic to justify loan write-offs they said would never happen. The student loan conundrum began in 2010 when Democrats used budget “savings” from ending the federal guaranteed-loan program to pay for the Affordable Care Act, according to the editorial. An analysis for the Education Department last year estimated that $435 billion in student loans (excluding private originated loans that are federally guaranteed) will eventually be written off. One reason: Democrats in 2010 created “income-based repayment plans” that limited borrower monthly payments to 10% of discretionary income and discharged the remaining balance after 20 years. These plans now comprise a third of new undergraduate and nearly 60% of graduate loans. Since many borrowers are making only de minimis payments, their balances continue to grow and accrue interest, although most will be forgiven. In other words, the feds are already set to write down a large chunk of debt. A University of Chicago study in December estimated that the top 10% of households by income would receive seven times as much benefit from a $50,000 loan write-down as the bottom 10%. Doctors and lawyers with six-figure salaries should be able to repay their loans and don’t need the $50,000 write-off, according to the editorial. Read more. (Subscription required.) 

*The views expressed in this commentary are from the author/publication cited, are meant for informative purposes only, and are not an official position of ABI.

A disturbing notice from the IRS, coded “CP21C,” informed recipients that the agency was offsetting their stimulus payments because of a possible federal debt they owed — from 14 years ago, the Washington Post reported. The letters were sent in January to more than 109,000 people, according to the Taxpayer Advocate Service. It was a mistake — yet another glitch in the stimulus-relief distribution efforts. “It’s very disheartening,” National Taxpayer Advocate Erin M. Collins said in an interview. “I know that the IRS has its struggles, and we are all trying to be patient because of the pandemic. But at the same time, these are things that just shouldn’t be happening.” This error stems from the IRS’s implementation of two sets of stimulus payments. The Coronavirus Aid, Relief and Economic Security Act, or Cares Act, which passed in the spring, authorized payments of up to $1,200 for individuals and $2,400 for couples filing jointly, based on 2018 or 2019 federal returns. The Cares Act required the IRS to deliver the first round of stimulus payments by Dec. 31. The more recent Coronavirus Response and Relief Supplemental Appropriations Act, passed at the end of December, called for additional stimulus payments of up to $600 per adult ($1,200 for couples). The payments were an advance against a tax credit referred to on the 2020 1040 Form as a “Recovery Rebate Credit.” The advanced payments were eligible to be paid in two rounds during 2020 and early 2021. Congress set deadlines for the IRS to get the payments out. Facing a backlog of 2019 returns, the IRS sent out the CP21C notice to inform people they would have to wait until they filed their 2020 return to receive the relief, because the agency failed to meet the Dec. 31 deadline. The erroneous notices are another example of the consequences of the agency’s antiquated technology, Collins said in a blog post.

A group of Democratic senators proposed new legislation yesterday that would provide relief to individual debtors who file for bankruptcy due to medical costs or who have lost their jobs and health insurance, Law 360 reported. The Medical Bankruptcy Fairness Act of 2021 was proposed by Sen. Sheldon Whitehouse (D-R.I.) and co-sponsored by Sens. Elizabeth Warren (D-Mass.), Sherrod Brown (D-Ohio), Tammy Baldwin (D-Wis.), and Richard Blumenthal (D-Conn.). It would streamline bankruptcy procedures for individual debtors whose financial troubles were caused by medical debt or public health-related shutdowns. Specifically, the bill would eliminate a requirement that debtors undergo credit counseling when they file for bankruptcy, which Sen. Whitehouse said makes little sense for people seeking court protection because of unanticipated medical costs that are largely out of their control. It also would significantly expand the dischargeability of student loan debt, which currently requires a debtor to pass a high bar of hardship to obtain. An increase in the protected amount of home equity to $250,000 for an individual debtor is also included in the proposal. Whitehouse has proposed similar legislation at least three times, with measures introduced in 2014, 2016 and most recently in July 2020 failing to come to a vote in the Senate. Warren was a co-sponsor of all three of the previous efforts.

Before leaving office, acting education secretary Mitchell Zais ordered Navient, one of the nation’s largest student loan companies, to refund $22.3 million that it allegedly overcharged the Education Department more than a decade ago, the Washington Post reported. In the early 2000s, the department’s inspector general found several private lenders, including Navient’s former sister company Sallie Mae, overcharged the federal government by tens of millions of dollars. Investigators recommended in 2013 that the department have Sallie Mae return the estimated $22.3 million owed, but the company denied any wrongdoing. Navient, which assumed Sallie Mae’s liabilities when the companies parted ways, continued to fight the audit and appealed to the Trump administration. Zais, who took over when Education Secretary Betsy DeVos resigned last month, has held the company liable to repay the money. Navient spokesman Paul Hartwick said the company is assessing its options in the wake of the decision.