Financial Affairs

This student loan forgiveness was removed from the stimulus bill

If you hope for this type of student loan sorry in the next stimulus plan, it was deleted.

Here’s what you need to know.

Student loans

Canceling student loans may be a priority for 45 million student loan borrowers. However, the latest stimulus bill that House Democrats passed exclude student loan forgiveness for your federal student loans. This is surprising to many, because most student loan forgiveness is for federal student loans – and the original Heroes Act included federal student loans, but the revised version apparently doesn’t. For example, income-based repayment plans and public service loan forgiveness allow you to receive a federal student loan forgiveness once you meet certain conditions. While the next stimulus bill could include student loan relief, student borrowers are curious about their student loan cancellation. Will the next stimulus include canceling student loans?

Student loan forgiveness

If you read the revised Heroes Act, the $ 2.2 trillion stimulus package passed by the House of Representatives, you will notice on page 1665 that the bill refers to a “private education loan.” rather than a federal student loan when it comes to student loan forgiveness. Here’s what’s in the current version of the Heroes Act:

  • Student loan waiver: The Secretary of the Treasury will pay up to $ 10,000 in private student loans for each borrower.
  • Of no interest: Student loan interest will not be capitalized on private student loans until February 1, 2021.
  • In economic distress: This only applies to student loan borrowers who are “in economic difficulty”.

Struggling economically, for example, refers to a student loan borrower who would otherwise pay $ 0 per month under an income-based repayment plan, was in default, or was 90 days late. on his student loans. It is not clear if House Democrats intended to only ask for student loan cancellation private student loans or if federal student loans were also supposed to be included. However, in its current form, the student loan exemption would only apply to private student loans. This is significant because federal student loans represent over 90% of the $ 1.6 trillion in outstanding student debt.

Will the next stimulus include student loan relief?

The good news is that the next stimulus package, if there is one before or after the November 3 election, may include student loan relief. The Cares Act provided for student loan relief, and President Donald Trump extended that student loan relief until December 31, 2020. That said, there is no guarantee that there will be another stimulus package. Congress passed the Cares Act – the $ 2.2 trillion stimulus package that included stimulus checks in March. However, House Democrats proposed the Heroes Act and Senate Republicans proposed the Heals Act months ago. Despite the starts and stops, Congress has not finalized a stimulus agreement. Although there is agreement in principle on stimulus checks and unemployment benefits, Congress did not agree on the amount of funding for various initiatives, including unemployment benefits or state and local aid.

In addition, there is no bipartisan support for canceling student loans in the next stimulus package. Both sides support the suspension of federal student loan payments, for example, for a temporary period. However, a payment break is different from the outright cancellation of a student loan. If the Heroes Act in its current form becomes law, the student loan exemption would only apply to a small subsection of the population. Given the requirement that you must be “economically distressed,” millions of borrowers would not meet Congress’ definition. Therefore, do not expect a blanket forgiveness of student loans in the next stimulus package because Congress does not seem ready to cancel student loan debt.

Pay off student loans

If student loan cancellation isn’t included in the next stimulus package, you still need a student loan repayment strategy. Here are some options, all free:

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