Updated July 26, 2020
If you’re hoping for student loan relief or forgiveness, you might not find it in the new stimulus package.
Here’s what you need to know.
Senate Majority Leader Mitch McConnell (R-KY) is expected to present his proposal for a new stimulus package on Monday. According to a draft of the latest stimulus plan examined by the New York Times, the stimulus package makes no mention of student loans. This includes any extension of student loan relief in the Cares Act or any student loan forgiveness. While the proposals and numbers may change when both parties create a bill, it is student loans increasingly unlikely to be part of the new stimulus. Of course, that can change before a final stimulus package is approved.
Student loans could end on September 30, 2020
Congress passed the Cares Act – the $ 2.2 trillion financial stimulus package – which provided multiple benefits to your student loans, including:
- Congress has suspended all payments for federal student loans until September 30, 2020.
- Congress has also set interest rates at 0%, so interest will not accrue on your federal student loans during this time.
- Congress halted collection of federal student loan debt during this period.
- Congress authorized non-payment of federal student loan debt during this period to “count” toward the 120 monthly payments required for civil service loan cancellation.
In the absence of an extension, these student loan benefits will expire on September 30, 2020. This means that student loan payments would resume as of October 1, 2020. The Cares Act also did not include a student loan waiver. Likewise, the new stimulus package proposal is unlikely to include student loan cancellations either. House Democrats have backed $ 10,000 in student loan cancellation for financially troubled borrowers, but this provision of the Heroes Act – the $ 3 trillion stimulus bill Democrats passed in the House of Representatives – did not become law.
What does the new stimulus plan include?
While student loans may not be part of the stimulus package, that doesn’t mean you won’t receive any economic relief. The second stimulus checks should be included in the new stimulus package. Treasury Secretary Steven Mnuchin has confirmed that there will be a second stimulus check of $ 1,200 for each individual. The criteria for receiving a second stimulus check would be the same as for the first stimulus check. If you earned less than $ 75,000 (individuals) or $ 150,000 (married / spousal filers), you will receive a stimulus check for $ 1,200 in a second. The first stimulus check was phased out of $ 5 for every $ 100 of adjusted gross income above these income limits up to $ 99,000 of adjusted gross income for individuals and $ 198,000 for tax filers. married / spouses. The good news is that Democrats are also backing a second stimulus check of $ 1,200, which may mean that the second stimulus checks are more likely to be confirmed for the new stimulus. The new stimulus package that McConnell will present would also include an extension of unemployment benefits, which will expire tomorrow, $ 105 billion to reopen schools, 5-year liability protection for businesses, an extension of loans from the Child Protection Program. payments (PPP), an employee retention tax credit and other incentives.
Proposal: No student loan repayment if you have no income
Earlier this week, Senator Lamar Alexander (R-TN) proposed a new student loan repayment plan in which student loan borrowers with no income would not make any student loan payments. Alexander also proposed that monthly student loan payments be based on 10% of discretionary income once a borrower is earning income again. Similar to current income-oriented repayment plans, a borrower could qualify for a student loan forgiveness after 20 or 25 years. Plus, the months you paid $ 0 will count around 20 or 25 years for the exemption of student loans. Alexander’s plan would apply to existing and new student loan borrowers, and would likely be limited to federal student loans only. If passed by Congress, Alexander’s plan would likely replace the current nine student loan repayment plans with these two options (no payment or 10% discretionary income). It’s unclear whether Alexander’s plan would be included in the new stimulus proposal – and therefore replace the Cares Act student loan relief – or whether it is stand-alone legislation.
After Republicans officially come up with their stimulus package, the proposals and numbers may change. Student loan relief – either an extension of the Cares Act student loan relief or a student loan forgiveness – does not appear in the stimulus package. Democrats have supported a one-year extension of student loan relief and a $ 10,000 rebate for financially troubled borrowers. Unless Congress comes to a consensus, it looks like there may not be an extension of these benefits for student loans. If consensus on student loan relief is reached, don’t expect student loan forgiveness in the next stimulus bill. Also, don’t expect the extension of the Cares Act benefits to last beyond December 31, 2020. Congress has a limited time before the summer vacation begins after August 7, so Congress will follow suit. this key timeline for the new stimulus. Congress will likely finalize the next stimulus package by August 7, but it is also possible that Congress will not reach a consensus by then.
How to repay student loans
If Congress doesn’t include any student loan relief in the new stimulus, be prepared. If you haven’t paid off a student loan since March, now is the time to prepare. Make sure you understand that your student loan payments could resume as of October 1 if there is no extension. Make sure you have a game plan for paying off student loans. What’s the best way to start? Start with these four options, all free:
Resources: Student loans
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