Student Loan News: Coronavirus and Mass Student Debt Relief
Welcome to Student Loan News, a weekly summary of developments and events affecting college debt in the U.S. Join us each Friday for a look at goings-on that could impact your own student loan situation.
Congress mulls major relief for student loan borrowers
In the face of the economic threat from the coronavirus, the federal government is looking at plans to offer mass student loan relief — possibly as much as $10,000 or more per borrower.
Congress is looking at relief packages that go far beyond the move announced last week to reduce federal student loan interest rates to zero. The most ambitious plan on the table right now comes from Senate Minority Leader Chuck Schumer (D-N.Y.), former presidential candidate Sen. Elizabeth Warren and others, who are calling for large-scale student loan forgiveness for all borrowers.
Under the proposal, the Department of Education would make payments on behalf of federal loan borrowers amounting to “a minimum” $10,000 in relief per borrower.
The government would also suspend all student loan payments, stop all interest capitalization, and halt garnishment on loans in collections.
As of Friday morning, the likelihood the plan could become reality was uncertain. However, it would be in line with other massive economic relief efforts to deal with the impact of the coronavirus.
Early last Saturday, the House passed a bill that would provide increased unemployment benefits, two weeks’ worth of paid sick leave, and up to three months of family and medical leave, The New York Times and others reported. The Trump Administration on Wednesday also called on Congress for a $1 trillion relief package that would see the Treasury Department send direct payments to taxpayers, as noted in a separate New York Times report.
Meanwhile, the Senate Democrats’ plan is by no means the only one Washington is considering to more directly impact student loan borrowers. Among them:
Last Friday (3/13): Sen. Patty Murray (D-Wash.) introduced a bill requesting $3 billion in education funding, including $600 million annually for financially-needy students affected by the coronavirus and resulting Covid-19 illness, according to Politico.
On Tuesday: Sen. Mitt Romney (R-Utah) called for offering mass student loan deferment to recent graduates, plus additional Pell Grant funding for current students.
On Wednesday: The House Financial Services Committee released a plan that would see student loan payments halted during the pandemic, along with a broader suspension of other debt payments, such as those on credit cards and mortgages.
We’ll be following these proposals and will update you on their progress.
How it affects YOU: If you have federal student loans and can’t afford to wait for relief, check out your income-driven repayment options. If that’s not enough, a deferment or forbearance would pause your payments — but interest would still pile up unless some of the measures above are enacted.
For private loans, contact your lender or loan servicer about its options. Many reputable banks, credit unions and online lenders provide economic hardship forbearance, albeit on a case-by-case basis.
As you decide what’s right for your debt repayment or college costs, keep these resources in mind too:
In a string of tweets posted Tuesday, Democratic presidential candidate Joe Biden embraced a pair of progressive ideas on the higher education front:
“Free” college education for some: Citing Sen. Bernie Sanders (I-Vt.)’s College for All Act, Biden said he is supporting tuition-free four-year college for families with household incomes below $125,000. Previously, the former vice president proposed only waiving tuition at community colleges.
Student loan discharge via bankruptcy: Biden said he was “fully endorsing and adopting” Sen. Elizabeth Warren’s plan to make it easier for distressed borrowers to receive relief on their education debt through the court system. It’s a reversal for Biden, who, as a senator in 2005, supported legislation that made it more difficult for borrowers to receive student loan relief via bankruptcy.
How it affects YOU: Biden’s stance on higher education could affect how you view him — and how you vote going forward. See how his policy views contrast with those of rival candidates Sen. Sanders and Pres. Trump.
Also in the news…
To handle the proposed student loan interest-waiver initiative, the White House has requested $40 million in new funding for the Department of Education, according to Politico.
New York Gov. Andrew Cuomo announced on Tuesday that debt owed to the state — including student loans — won’t require payments over the next 30 days. Although that freeze won’t affect New York student loan borrowers who have federal or privately-held debt not owned by the state, it will at least provide relief for about 165,000 people, according to Yahoo Finance. Legislation proposed last Friday in Pennsylvania’s state Congress would halt student loan payments to the state’s Higher Education Assistance Agency for 60 days. The state has among the highest average student loan balances in the country.
Canada’s government suspended the collection of its federal student loan payments on Wednesday, CBC reported. Borrowers there will automatically be enrolled in a six-month “holiday” from their repayment.