This week, Democratic House leaders unveiled the HEROES Act. The $3 trillion stimulus proposal would provide massive financial assistance to individuals, businesses, nonprofit organizations, and state and local governments.
Among the many provisions of the bill is widespread student loan forgiveness for borrowers. Specifically, the bill provides for $10,000 in across-the-board federal student forgiveness, as well as up to $10,000 in private student loan forgiveness. Thus if the bill were to pass and become law, all student loan borrowers could receive up to $20,000 in total student loan forgiveness.
As the bill comes to the House floor for a vote, Democratic House leaders are scrambling to try to scale back the broad student loan forgiveness provisions. Rep. Nita Lowey (D-NY) introduced an amendment that would dramatically reduce the student loan forgiveness benefits.
Lowey’s amendment would limit student loan forgiveness to only those borrowers who were “economically distressed” as of March 12, 2020 — the day before the President declared a national emergency due to the COVID-19 pandemic. That would effectively cut out millions of student loan borrowers, particularly those who became economically distressed after the emergency declaration on March 12.
Borrowers would only meet the “economically distressed” definition if they were delinquent or in default on their loans as of March 12, 2020, or if they were in an economic hardship deferment or forbearance as of March 12, 2020, or if their calculated monthly payments under an income-driven repayment plan was $0/month.
Democratic House leaders introduced the amendment because they are concerned about the cost of student loan forgiveness. The Congressional Budget Office estimated that the student loan forgiveness provision would cost upwards of $250 billion or more, which was much higher than initial estimates.
Neither the original version of the HEROES Act, nor the Amendment, have — as of publication — been voted on by the full House. This is an evolving situation changing by the hour, so stay tuned.