What student loan borrowers need to know about when relief ends
This story has been updated.
Congress reached agreement on a new stimulus package. And that’s not good news for student borrowers.
Lawmakers have engaged in intense discussions to reach consensus on a new compromise stimulus package that could be passed by Congress this week. While there was broad agreement on some areas of relief – such as extending unemployment assistance and providing additional funds to small businesses – other proposals met with more partisan opposition. . This has been an obstacle to finding common ground.
As of March, the CARES Act suspended all payments on federal student loans held by the government, froze all interest, and halted all collection efforts. The collection freeze included involuntary wage garnishments and interceptions of federal tax refunds. The CARES Act student loan relief was originally scheduled to end in September, but the Trump administration has granted two extensions – the first to Dec.31 and the second to Jan.31 to give Congress additional time to extend relief.
Final Stimulus Package – No Additional Relief for Student Loans
Congress had seemed likely to extend existing student loan relief until the spring. A draft summary of a bipartisan stimulus proposal released earlier in December included an extension of existing student loan relief until April.
But POLITICAL reports that the final version of the stimulus package about to be passed by Congress does not include any further expansion of student loan relief. And the billions of dollars allocated to extending student loan relief that were in the summary of the previous draft are not listed in a abstract of the last bill.
This means borrowers may need to plan to resume their payments soon after January 31.
Biden could still extend student loan relief
Despite the bad news for student loan borrowers, President-elect Biden could further extend the moratorium on student loan payments, interest and collections by Order in Council once he takes office on January 20, as may the Trump administration did so in August and earlier. this month, especially if the economy shows no signs of improving. Biden has previously expressed his willingness to issue executive orders if necessary to support the economy.
However, student loan managers and some consumer advocates have expressed concern about the short period between January 20 (when Biden would be sworn in) and January 31 (when student loan relief ends). Preparing to put millions of borrowers back on a repayment position, then halting the process within two weeks of planned implementation, could lead to administrative problems and other headaches for distressed student loan borrowers.
In a recent survey by Student Debt Crisis and Savi, 77% of student loan borrowers covered by the moratorium indicated that they did not feel financially secure enough to resume their student loan payments, and more than half of Borrowers surveyed rate their current financial well-being as poor or very poor since the start of the pandemic earlier this year.
What else is in the bill?
Despite the flaws in the stimulus deal on student loan relief, the bill will nonetheless contain other important provisions, including the following:
- Stimulus checks of $ 600 for people who made less than $ 75,000 in 2019, and smaller stimulus checks for those who made between $ 75,000 and $ 99,000. Like stimulus checks issued under the CARES Act, new stimulus checks should not be counted as taxable income for the purposes of federal student loan repayment plans, although this has not yet been confirmed.
- An extension of federal unemployment benefits of up to $ 300 per week, effective December 27 and through mid-March 2021.
- Additional funding for small businesses through the Paycheck Protection Program.
- $ 25 billion in emergency rent assistance and an extension of the moratorium on evictions until January 31, 2021.
What Should Student Loan Borrowers Do?
For now, student loan borrowers should expect to start repaying in February, after the moratorium expires on January 31. Under the current moratorium provisions, months of suspended payments will continue to count towards loan forgiveness programs (such as loan forgiveness for the civil service), as well as loan rehabilitation programs for borrowers who are in debt. ‘are working to fix delinquent federal loans.
Borrowers who fear paying their payments in February should consider their repayment plan options, although Biden may extend relief by executive order. For borrowers who have experienced a drop in income, an income-based repayment plan can often provide affordable monthly payments. Borrowers already on an income-based repayment plan can request that their monthly payments be recalculated at any time due to changes in circumstances, such as reduced income, job loss, or change in status. marital.
Additionally, many student loan managers have voluntarily pushed back the annual recertification deadlines for income-oriented repayment plans until 2021, which means that many borrowers already enrolled in an income-oriented plan will not have to. may not have to take action on their loans for several months. Borrowers should contact their loan officers for more information.
Update, December 21, 2020: The text of the stimulus bill released on Monday confirms that it does not include an extension of student loan relief.