Here’s what the new stimulus bill does for student loan borrowers
This story has been updated to reflect that the stimulus bill also provides private student loan forgiveness.
Yesterday, House Speaker Nancy Pelosi and her management team unveiled the latest stimulus proposal in response to the ongoing COVID-19 pandemic. the Omnibus law on emergency health and economic recovery solutions (HEROES law) is a sprawling $ 3 trillion proposal to inject cash and other relief into the economy. Senate Republicans immediately called the bill “dead on arrival. “
Various provisions, if adopted, would benefit the bill. student loan borrowers. Here’s a breakdown.
Student loan forgiveness
The HEROES Act would provide a $ 10,000 general student loan exemption for federal student loan borrowers. This corresponds to a previous Senate Democrats’ proposal and would entail an estimated 16 million Americans are freeing themselves from student debt. The Act also provides for $ 10,000 in private student loan forgiveness. However, it is far from the $ 30,000 in student loan forgiveness suggested by progressive House Democrats.
Extension of the protections of the CARES law
The CARES law – the first major stimulus bill passed in response to the pandemic – suspends all payments, interest and collections on federal student loans held by the government until September 30, 2020. The HEROES Act would extend these protections for an additional 12 months until September 2021, giving borrowers a full year and a half to recover financially before payments become due again. . The protections would also be extended to federal FFEL program student loans held for business purposes and Perkins loans, which were excluded from the CARES Act.
Public Service Loan Remission Corrections
The HEROES law would also attack problems with the Public Service Loan forgiveness program (PSLF), which allows eligible public servants to have their federal student loans canceled after 10 years of repayment. Currently, only direct federal student loans are eligible for remission under the PSLF program. Borrowers who have Federal FFEL program student loans held in commerce and Perkins loans are not eligible unless they consolidate these loans through the Federal Direct Consolidation Program. However, by consolidating, they would wipe out any progress towards the 10-year payback period and effectively start over. The HEROES law would allow payments made before consolidation to be taken into account in the PSLF.
Direct payments and unemployment benefits
The HEROES Act provides for additional direct cash payments to households, including $ 1,200 per person earning up to $ 75,000 per year. Families with dependent children could receive up to $ 6,000. Improved unemployment benefits of an additional $ 600 per week would also be extended until January 2021. This could help borrowers cover payments for other obligations, such as private student loans not covered by the CARES law and the HEROES law.
Will this bill pass?
Even if the HEROES law is passed by the House, it will still have to be passed by the Senate and promulgated by the President to become law. Senate Republicans have criticized the bill as “ambitious” and not something that can pass the Senate. However, the bill will be a potential starting point for negotiations between the House and the Senate. The Senate will do not resume the session before June, it will therefore take at least several weeks (if not more) before a new stimulus bill becomes law.