The historic stimulus package Congress is expected to pass to inject relief into an economy reeling from the coronavirus pandemic would grant the millions of Americans with federal student loans a break from their payments for at least six months.
Based on language in the $2 trillion bill, which is still subject to change, federal student loan borrowers wouldn’t have to make a payment toward their debt until this October. Any interest that accrues during the suspension will be waived.
The U.S. Department of Education would also put a halt to its collection practices during the health crisis, including seizing defaulted borrowers’ tax refunds and Social Security checks. That should bring relief to the roughly 9 million borrowers in default, or those who haven’t made a payment in a year or more.
There’s also a provision that says employers wouldn’t have to pay taxes on financial assistance they give to their employees for their student debt, though it only lasts until the end of the year.
Plans to help the 45 million Americans with student debt amid the pandemic, many of whom find themselves with less or no income, have been mounting. The average monthly bill is almost $400.
President Donald Trump announced earlier this month that the government would be waiving interest on federal student loans throughout the outbreak. And U.S. Department of Education Secretary Betsy DeVos said later borrowers could pause their bills for at least 60 days in a “coronavirus forbearance.”
Although the stimulus bill would increase that reprieve to six months, consumer advocates and some Democrats have said that suspending payments was inadequate and they warned of a worsening crisis if there weren’t more relief measures.
Millions of student loan borrowers were already struggling to keep up with their monthly bills before the coronavirus pandemic. More than 1.2 million borrowers went into default in 2019, a 14% increase from the year prior.
“Pausing payments simply kicks the can down the road,” said Persis Yu, director of the Student Loan Borrower Assistance Project at the National Consumer Law Center. “We need to cancel student loan payments and ensure that balances go down so borrowers can make ends meet now and then recover along with the economy.”
A plan unveiled last week by Senate Minority Leader Chuck Schumer, D-N.Y., and Sen. Elizabeth Warren, D-Mass., among other Democrats, would have canceled at least $10,000 of the debt for each borrower. Another proposal would have raised that forgiveness amount to $30,000.
Apparently Republicans balked at the idea of a student debt jubilee.
“Democrats are trying to reduce student loans by $10,000,” Sen. Lindsey Graham, R-S.C., said on Fox News on Sunday. “What the hell has that got to do with the virus?”