Today, House Speaker Nancy Pelosi (D-CA) and House Democrats unveiled their newest coronavirus relief and stimulus package, referred to as the Heroes Act. They are pitching it as Phase Four of coronavirus relief. It includes money for states and local governments, $2,000 monthly stimulus checks for Americans, and both more student debt relief and more money for higher education.
Congress passed the CARES Act in March and it provided money for small businesses and enhanced unemployment benefits. Additionally, it provided a suspension of student loan payments interest-free through September 30th, 2020. The legislation also sent $14 billion to colleges and universities to provide emergency grants to students and other relief for institutions.
This bill has some provisions related to the CARES Act. For example, it overturns Secretary DeVos’s decision to exclude DACA students from the emergency aid. Additionally, it made sure that the emergency grant aid students received under the CARES Act would not be viewed as taxable income.
The Heroes Act extends the student loan relief from the CARES Act for another year, pausing student loan payments until September 30th, 2021. And interest accrual would be stopped during the same time. However, that provision could be extended because the legislation includes a trigger based on the country’s unemployment.
The bill also includes a $10,000 student loan cancellation. This is similar to the proposal of Senate Democrats that made payments for borrowers through the emergency and guaranteed a minimum of $10,000 in student debt forgiveness after the emergency. Some criticized this, as borrowers with high balances and payments—and likely higher incomes—would receive more benefit.
The House Democrats’ forgiveness plan functions somewhat differently. It would only suspend payments, not make them, but would provide the $10,000 cancellation within 30 days of the passage of the bill. This has the benefit of being more targeted cancelling the entire balance for approximately 35% of borrowers, especially those struggling the most, without providing others with larger balances more money.
The legislation also appropriates $90 billion to a state stabilization fund with 30 percent of the funds to be used for public higher education. This differs in how the CARES Act functioned. It used a formula to send money directly to colleges and universities, regardless of sector. The Heroes Act also provides an additional $10 billion for Historically Black Colleges and Universities (HBCUs) and Minority-Serving Institutions (MSIs).
However, the Heroes Act requires states to chip in too to receive the money. The bill includes a maintenance of effort provision so states will maintain their higher education funding, rather than use federal dollars to replace state money.
Leading up to the introduction of the Heroes Act some had characterized it as a Democratic wish list, with Democratic House leadership trying to appease more liberal members. Others will likely say this doesn’t go far enough. For example, Senator Kamala Harris (D-CA) proposed monthly $2,000 payments, rather than a one time payment.
Regardless of dynamics in the party and in the House, Pelosi still faces a challenge in the Senate. Senate Majority Leader Mitch McConnell (R-KY) recently pushed back on the need for more stimulus or relief at all.