As the coronavirus crisis rapidly worsens, consumer advocates are increasingly sounding the alarm bells on behalf of student loan borrowers.
While President Trump has ordered the freezing of accrued interest for the federal government student loans, the relief is limited, and it does not include any suspension of student loan payments. Everyone’s student loan bills continue to be owed. In addition, the government continues to forcibly collect defaulting federal student loan borrowers through payday foreclosures, Social Security compensations and foreclosures of tax refunds, depriving distressed borrowers of an income that they cannot afford. they desperately need it.
Senatorial Minority Leader Charles E. Schumer (DN.Y.), with Sens. Patty Murray (D-Wash.), Elizabeth Warren (D-Mass.) And Sherrod Brown (D-Ohio) have presented a bailout for student loan borrowers who are struggling with job loss, reduced income and long-term uncertainty. The bill proposes the following:
- $ 10,000 in immediate, tax-free cancellation of your student loan.
- For student loan borrowers in good standing, the US Department of Education would cover the borrowers’ monthly payments. In other words, payments wouldn’t be suspended – the government would instead make payments on behalf of borrowers, so borrowers don’t have to.
- Since the payments would still be made, borrowers on track to cancel the civil service loan or cancel the 20- or 25-year income-tested repayment plan would continue to move forward. Payments made by the government would count. And for borrowers who do not participate in these programs, their overall balance would continue to be repaid.
- For borrowers in default of their federal student loans, the US Department of Education will suspend all wage garnishments, Social Security compensations, and foreclosures of federal tax refunds.
- The above measures would be implemented for the duration of the national emergency related to the coronavirus pandemic.
- The bill would also codify President Trump’s interest rate freeze into federal law.
In a statement, Senator Warren mentionned, “The last time our economy collapsed, this country made a devastating mistake: We turned our backs on students and families to bail out giant banks. Student loan borrowers – especially students of color – never fully recovered from this economic blow to the stomach. This time around, by canceling student debt payments for millions, we will correct the mistake that still holds back a generation of people and has driven our economy. ”
Only Democratic senators support the proposal at the moment. It is therefore not clear whether the bill could be passed by the Republican-controlled Senate. However, the Senate is engaged in negotiations to finalize a massive economic stimulus package that will include relief and bailouts for businesses and millions of Americans. It is possible that all or some of the above proposals will be included in a finalized version of the stimulus bill. Waiting, Here are some options available to student loan borrowers to manage their student loans during the crisis.
This is a fluid and rapidly changing situation. Stay tuned.
UPDATE: The Recovery plan adopted by the Senate does not include any student loan discount.