May 15, 2020

House Passes HEROES Act With Limits On Student Loan Relief – What’s Next?

House Passes HEROES Act With Limits On Student Loan Relief – What’s Next?

The U.S. House of Representatives just passed the HEROES Act – a massive, $3 trillion stimulus bill. The bill is designed to provide broad financial relief to individuals, businesses, nonprofit organizations, and state and local governments who have been hit hard by the economic fallout from the COVID-19 pandemic. Senate leadership has already declared the bill “dead on arrival,” and the President has promised to veto it.

Student Loan Relief Provided by the HEROES Act

The original version of the bill included substantial student relief, including the following:

  • $10,000 in federal student loan forgiveness;
  • $10,000 in private student loan forgiveness;
  • An extension of the CARES Act suspension of payments, interest, and collections on government-held federal student loans through September of 2021, and an expansion of those protections to include commercially-held FFEL-program federal student loans as well as Perkins loans.
  • A fix to Public Service Loan Forgiveness that would allow payments made on previously-consolidated federal student loans to potentially count towards the 120 qualifying monthly payments required for the program.

Push to Limit Student Loan Forgiveness

Democratic House leaders, concerned about the ballooning cost of the bill, made a last-minute push to amend and limit the student loan forgiveness provisions of the Act. The amendment restricts eligibility for student loan forgiveness to those who are “economically distressed.” The Amendment defines this as someone who, as of March 12, 2020 (just prior to the national emergency declaration), met one of the following criteria:

  • They were delinquent or in default on their student loan;
  • They were in an economic hardship deferment or forbearance on their student loan;
  • They were in an income-driven repayment plan with a monthly payment amount of $0/month.

Consumer advocates expressed disappointment at the reduced student loan forgiveness benefits. The amendment effectively cuts off millions of student loan borrowers from the student loan forgiveness provisions, including those who lost their jobs after March 12, 2020. However, it also reduces the cost of the bill by at least $250 billion.

What Else Is In The Bill?

The HEROES Act also includes numerous other economic relief provisions, including the following:

  • Additional direct cash payments to households, including $1,200 per individual earning up to $75,000 per year. Families with dependent children could receive up to $6,000.
  • An extension of enhanced unemployment benefits (which is an additional $600 per week) to January 2021. 
  • Hazard pay for essential workers.
  • Housing assistance to help renters and homeowners with rent and mortgage payments.
  • Direct financial relief to state, local, and tribal governments.
  • Billions of dollars dedicated to Coronavirus testing and contact tracing initiatives.

What’s Next?

Now that the bill has passed the House, it will be sent to the Senate. In order for a bill to become law, it must pass both the House and the Senate, and then be signed by the President.

Senate leadership has already described the HEROES Act as “dead on arrival,” before the final version even passed. The Senate is not likely to return to Washington until sometime in June, so no quick action will be taken. The President has also indicated that he opposes the House bill. However, the Democratic House leadership views the passage of this bill as an important negotiating step in crafting a final stimulus bill that can win over sufficient votes in both chambers of Congress to become law.

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