President Donald Trump said today that student loan relief may be extended.
Here’s what you need to know.
Will there be more student loan relief? Trump briefly addressed student loans today during a press briefing at the White House. “We also suspended student loan payments for six months, and we’re looking to do that additionally and for additional periods of time,” Trump said. Based on these comments, the Trump administration may be looking to push a potential extension of the student loan benefits granted under the Cares Act, which is the $2.2 trillion stimulus package that Congress passed in March.
Student loan relief may end September 30, 2020
Through September 30, 2020, the student loan relief under the Cares Act:
- set interest rates at 0%, so interest will not accrue on your federal student loans;
- halted collection of federal student loan debt; and, among other benefits,
- “counted” non-payment of federal student loan debt toward the 120 required monthly payments for public service loan forgiveness.
The student loan relief included in the Cares Act followed Trump’s executive action that provided similar student loan relief for 60 days prior to passage of the Cares Act. Absent an extension from Congress, the student loan relief in the Cares Act will expire on September 30, 2020. This means that your student loan payments would resume as early as October 1, 2020. Trump, who is running for re-election, could take executive action to extend student loan relief, as he did earlier this year. The Trump administration also could convince Senate Republicans to extend student loan relief beyond September 30, 2020, although that may be an uphill battle, as many Senate Republicans do not support an extension of this student loan relief.
The new stimulus doesn’t provide this student loan relief
Senate Majority Leader Mitch McConnell (R-KY) and multiple senators introduced the Heals Act (Health, Economic Assistance Liability Protection & Schools Act), a ~$1 trillion stimulus package proposal. The stimulus package includes, among other initiatives, second stimulus checks, unemployment benefits, school funding and more Payment Protection Program (PPP) funding. However, the Heals Act does not include an extension of the student loan relief beyond September 30, 2020. Next week, Congress will begin to debate the new stimulus package proposal. White House Chief of Staff Mark Meadows said that Republicans (who are targeting a $1 trillion stimulus package) and Democrats (who are targeting a $3 trillion stimulus package) are far apart on many issues, which potentially could delay a stimulus deal. Proposals and funding amounts, including for student loan relief, can change in the coming weeks. However, there is no current indication that Senate Republicans would change the Heals Act to extend student loan benefits from the Cares Act.
New stimulus: student loans
What’s in the new stimulus? Here’s what the new stimulus means for your student loans. Sen. Lamar Alexander (R-TN) proposed a new student loan repayment plan as part of the Heals Act. Here are some highlights:
- No Student Loan Payments: If you have no income, you would make no student loan payments.
- 10% Discretionary Income: If you have income, your monthly student loan payments would be based on 10% of discretionary income.
- Student Loan Forgiveness: Like current income-driven repayment plans, you can receive student loan forgiveness after 20 or 25 years. Non-payments during months in which you pay $0 will count toward the 20 or 25 years for student loan forgiveness.
Essentially, Alexander’s proposal would continue the federal student loan payment pause only for borrowers with no income. The 10% discretionary income proposal is similar to existing income-driven repayment plans that are available to federal student loan borrowers.
It’s too soon to tell whether any student loan relief will be included in the new stimulus. Democrats want to extend the student loan relief in the Cares Act for 12 months until September 30, 2021. Democrats want to provide financial relief to more than 40 million federal student loan borrowers and help millions who have lost their jobs in the wake of Covid-19. To date, Senate Republicans don’t want to extend this student loan relief beyond September 30, 2020. Trump’s comments may indicate that Congress is working on a bipartisan solution. However, the comments also may reflect Trump’s perspectives on student loans, which may be different than the view of Senate Republicans. Trump’s comments on student loans come one day after he said during a trip to West Texas that second stimulus checks may be more than $1,200.
Senate Republicans were willing to agree to student loan relief in March, but now they believe the economy is on relatively stronger footing than during the beginning of the Covid-19 pandemic and an extension is unnecessary. Ultimately, Congress will decide the contents of the new stimulus. However, the president can veto the legislation. Based on this key timeline for the new stimulus, Congress had intended to finalize the next stimulus package by August 7. However, given the differences in legislative proposals, it’s possible that Congress will not finalize a new stimulus by then.
How to pay off student loans
Will student loan relief be in the new stimulus? Even if student loan relief is included in the new stimulus, make sure you have a game plan to pay off student loans. What’s the best way to start? Start with these four options, all of which have no fees: