An ambulance sits outside the United States Capitol in Washington, DC on March 23, 2020, as the Senate continues negotiations on a relief plan in response to the COVID-19 outbreak, known as coronavirus name.
Saul Loeb | AFP | Getty Images
The historic stimulus package passed by Congress gives millions of Americans on federal student loans a break in payments for at least six months.
Under the $ 2 trillion bill, federal student loan borrowers will not have to repay their debt until October. Any interest accrued during the suspension will be forfeited. And even if a borrower doesn’t make payments during the reprieve, time will still count for government forgiveness programs, if they pursue one, like the utility loan forgiveness.
The six-month break is automatic, meaning borrowers won’t need to contact their student loan officer to request it.
Collection practices, such as seizing tax refunds and Social Security checks from delinquent federal student loan borrowers, will also cease throughout the public health crisis, bringing relief to the estimated 9 million. borrowers in default, or those who have not made a payment in a year or more. (The US Department of Education also announced this week that it would repay any money it had already raised from delinquent borrowers during the pandemic, estimating it would help some 830,000 people.)
There is a provision in the stimulus package that says employers would not have to pay taxes on the financial aid they give their employees for their student debt, although it only lasts until the end of the year.
President Donald Trump announced earlier this month that the government would waive interest on federal student loans throughout the outbreak. And the Secretary of the United States Department of Education, Betsy DeVos, later said that borrowers could put their bills on hold for at least 60 days in a “coronavirus tolerance. ”
Although the stimulus bill extends that reprieve to six months, consumer advocates and some Democrats have said the suspension of payments was inadequate and they warned of a worsening of the crisis if there were not more relief measures.
Millions of student loan borrowers were already struggling to meet their monthly bills ahead of the coronavirus pandemic. More than 1.2 million borrowers defaulted in 2019, a 14% increase of the previous year.
“Suspending payments only speeds things up,” said Persis Yu, director of the student loan aid project at the National Center for Consumer Law. “We need to reverse student loan payments and ensure that balances go down so borrowers can make ends meet now and then recover with the economy.”
For a brief moment, it looked like the pandemic could trigger the cancellation of student debt that has become a central platform among progressives. A plan unveiled last week by Senate Minority Leader Chuck Schumer, DN.Y., and Senator Elizabeth Warren, D-Mass., along with other Democrats, have reportedly forgiven at least $ 10,000 in debt for each borrower. Another proposal would have increased this rebate amount to $ 30,000.
however, Republicans had apparently hesitated to the idea of a student debt jubilee.
“Democrats are trying to cut student loans by $ 10,000,” the senator said. Lindsey graham, RS.C., told Fox News on Sunday. “What does this have to do with the virus? ”