For much of 2020, millions of student loan borrowers have not had to repay their federal student loans because of emergency pandemic relief. But that relief will soon end.
Congress passed the CARES Act in April in the wake of the rapid economic collapse brought about by the Covid-19 pandemic. Although the implementation of the CARES Act has been messy, the CARES Act provided substantial relief to student loan borrowers. The stimulus bill suspended payments, interest, and collections on all government-held federal student loans through September 30, 2020. President Trump subsequently extended that relief to December 31 through executive action. In addition, some private and commercial student loan lenders have provided temporary relief to borrowers, which is also expiring soon (if it has not already).
Congressional Democrats have been pushing for a further extension and expansion of the pause in student loan payments, interest and collections. The House passed the $3.4 trillion HEROES Act in May, which would have extended the CARES Act’s student loan relief by a full year to September 30, 2021, and expanded that relief to include commercially-issued FFEL-program federal student loans and Perkins loans, which had been excluded from the CARES Act. The bill also included $10,000 in federal and private student loan forgiveness for borrowers experiencing economic distress. However, Senate Republicans have repeatedly rejected the HEROES Act, and there is little to no chance of bipartisan agreement on student loan relief before the end of the year.
This means that millions of student loan borrowers will start getting billed in January for their student loans for the first time in nearly a year, and borrowers in default will again be subject to collections efforts as well as wage garnishments, tax refund seizures, and offsets of Social Security benefits. Many borrowers are still struggling financially, while cases of Covid-19 are on the rise in many parts of the country.
A new poll by the Pew Project on Student Borrower Success finds that Americans have profound concerns about re-entering repayment on their student loans. Nearly 9 in 10 (87%) of survey respondents agreed that many student loan borrowers will have difficulty paying back their student loans in the current economic environment, and 67% believe that when borrowers struggle to pay back their student loans, it can negatively affect the economy. Nearly 6 in 10 borrowers who benefited from the CARES Act’s pause on student loan payments said that it would be difficult to resume payments in the next month if they had to do so, and nearly 1 in 4 borrowers report feeling insecure about their financial stability.
In light of these concerns, respondents are largely supportive of providing further relief to struggling student loan borrowers. 81% of respondents agreed that the government should make it easier for borrowers to repay their student loans.
If the government does not act to further extend student loan relief by the end of the year, borrowers may still have options such as deferments and forbearances, income-driven repayment, payment re-calculations, and temporary hardship modifications. Learn more here.