If you have these student loans, this new congressional bill may help give you some student loan relief.
Here’s what you need to know.
Rep. Elise Stefanik (R-NY) introduced new bipartisan congressional legislation that would expand protections for Perkins student loan borrowers who are excluded under the Cares Act, the $2.2 trillion financial stimulus package. The COVID-19 Perkins Loan Relief Act would allow nearly 2 million student loan borrowers with Perkins loans to defer student loan payments through September 30, 2020.
“COVID-19 presented significant challenges and uncertainty…with student loan payments,” Stefanik said. “This bipartisan legislation closes a gap in the CARES Act and allows those with Perkins loans to defer payments until October as we recover from the COVID-19 crisis.”
Why Perkins loans are excluded from the Cares Act
The Cares Act provides several protections for federal student loan borrowers through September 30, 2020, including:
However, the Cares Act doesn’t help all student loan borrowers nor does it cancel student loan debt. Under the Cares Act, “federal student loans” only includes federal student loans that are owned by the U.S. Department of Education. This includes Direct Loans such as Stafford Loans, for example, but excludes other type of federal student loans that are not owned by the federal government such as FFELP loans and Perkins loans. Perkins loans are typically owned by colleges and universities and are not eligible for student loan deferment or 0% interest through the Cares Act. As a result, these student loan borrowers must make student loan payments during the Covid-19 pandemic without any student loan debt relief. If passed, this legislation would protect Perkins borrowers and provide the same financial relief enjoyed by Direct student loan borrowers.
How the student loan bill works
The bill, which is not currently law, would likely mirror the Cares Act and work like this:
- the U.S. Department of Education, led by Betsy DeVos, would enter into agreements with the owners of the Perkins loans (namely colleges and universities).
- The agreements would stipulate that all student loan payments would be suspended through September 30, 2020.
- The Education Department would pay any interest payments during this period.
- All involuntary student loan debt collection of Perkins loans also would stop during this period.
Similar to the Cares Act, Perkins loans borrowers likely would be notified within 15 days of these changes, and also would receive at least six notices before regular student loan payments would return after September 30, 2020. The legislative proposal also would, similar to the Cares Act, “count” non-payment of Perkins loans toward student loan forgiveness programs. The bill is co-sponsored by Rep. Katie Porter (D-CA), Rep. Susie Lee (D-NV), Rep. Lori Trahan (D-MA) and Rep. Alma Adams (D-NC). In April, Stefanik also introduced the Equity in Student Loan Relief Act, which would help FFELP borrowers who are also left out of the Cares Act receive student loan debt relief under the Cares Act.