Senate Republicans released their $1 trillion coronavirus relief bill on Monday, and it largely leaves out additional relief for student loan borrowers.
The proposal, which Senate Majority Leader Mitch McConnell (R-Ky.) referred to as the Health, Economic Assistance, Liability Protection and Schools (HEALS) Act, would provide additional one-time economic stimulus payments to individuals, expand the Paycheck Protection Program (PPP) and extend federally-funded weekly unemployment benefits.
The GOP proposal would not extend the current federal student loan forbearance period provided in the CARES Act, which Congress passed in March. Under that law, certain federal student loan borrowers do not have to make student loan payments through Sept. 30, 2020, and interest does not accrue on their loans during that time. It also suspended collections activities for borrowers whose loans are in default.
The GOP’s proposal does not extend the currently available federal student loan relief. Here’s what you need to know.
Consumer Advocates Respond to the GOP Coronavirus Relief Proposal
The exclusion of additional student loan borrower protections in the HEALS Act comes after consumer advocates rallied for Congress to provide more aid to borrowers who need it the most.
The National Consumer Law Center (NCLC), a nonprofit organization that works for consumer justice, for example, called for relief provided under the CARES Act to be expanded to commercially held Federal Family Education Loan (FFEL), Health Education Assistance Loan (HEAL) and Perkins loan borrowers; to allow student loans to be discharged in bankruptcy; or to cancel outstanding student loan debt altogether.
The NCLC released a statement in response to the GOP’s proposal excluding relief for student loan borrowers.
“This new proposal continues to leave out millions of federal student loan borrowers and is less generous than current income-driven repayment plans, and will be more expensive for borrowers over the long term,” said Persis Yu, director of the NCLC’s Student Loan Borrowers Assistance Project, in the statement. “This is not relief and fails the 43 million student loan borrowers counting on Congress to act.”
Is There No Hope for More Student Loan Relief?
Just because the GOP proposal doesn’t include a provision to extend the current federal student loan forbearance period doesn’t mean we might not see something written into law.
Keep in mind the GOP proposal is merely a starting point for negotiations between the House and Senate.
The House, which passed its own proposal in May—the $3 trillion HEROES Act—has already been vocal about how the GOP proposal falls flat.
“It’s unacceptable that, AFTER MONTHS, Senate Republicans have presented us with a half-hearted, half-baked legislative proposal,” Senate Minority Leader Chuck Schumer (D-NY) tweeted on Monday.
The HEROES Act would provide $10,000 in both federal and private student loan forgiveness to borrowers who are struggling financially due to COVID-19. Though the HEROES Act in its current form is not expected to receive a Senate vote, Democrats may rally to include additional student loan borrower relief as Congress inches toward passing the next stimulus bill.
Steps Student Loan Borrowers Can Take Now
Since it remains unclear if Congress plans to include more student loan relief, borrowers should prepare a plan now on the assumption that there won’t be more payment relief after Sept. 30.
If October rolls around and federal student loan borrowers can’t afford to pay their loans at all, they can apply for deferment or forbearance through their student loan servicer. Here’s how they work:
- Student loan deferment allows borrowers to stop making payments on their student loans. Interest will not accrue on subsidized federal student loans and Perkins loans in deferment, but interest will still accrue if you have other types of federal loans or private loans. That means not making payments could cause your balance to balloon over time. Certain federal student loans are eligible for unemployment deferment for up to three years while individuals are seeking and unable to find full-time employment.
- Student loan forbearance allows borrowers to temporarily stop making payments, or make smaller payments, on their federal student loans. In all cases, interest will still accrue while loans are in forbearance—so even if your payment is reduced, it might not be enough to cover the interest and your overall balance could increase. There are two main types of forbearance: General—which you can qualify for if you experience financial difficulties, medical expenses and changes in employment—and mandatory, which covers individuals who have monthly payment amounts that equal 20% or more of their monthly gross income. Refer to the Federal Student Aid website on forbearance options to determine which might be the best for you.
Private student loan services are not subject to student loan relief provisions in the CARES Act, and it’s unclear if they will be included in the next stimulus relief package, should it include student loan assistance. That doesn’t mean private student loan borrowers are out of options, though.
In May, many private student loan servicers, including Sallie Mae, Navient and Nelnet, offered repayment assistance programs to borrowers struggling during the COVID-19 crisis. It’s worth picking up the phone and calling your private student loan servicer to discuss your options if you’re unable to make loan payments.