If you’re hoping for this type of student loan forgiveness in the next stimulus package, it was removed.
Here’s what you need to know.
Student loan forgiveness may be top of mind for 45 million student loan borrowers. However, the latest stimulus bill that House Democrats passed excludes student loan forgiveness for your federal student loans. That’s 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 does not. For example, income-driven repayment plans and public service loan forgiveness enable you to receive federal student loan forgiveness once you meet certain requirements. While the next stimulus bill could include student loan relief, student loan borrowers are curious about student loan forgiveness. Will the next stimulus include student loan forgiveness?
Student Loan Forgiveness
If you read the revised Heroes Act—the $2.2 trillion stimulus package that the House of Representatives passed—you’ll notice on page 1665 that the bill refers to “a private education loan” rather than a federal student loan with respect to student loan forgiveness. Here is what is inside the current version of the Heroes Act:
- Student Loan Forgiveness: The Secretary of the Treasury shall pay up to $10,000 of private student loans for each borrower.
- No Interest: Student loan interest will not be capitalized on private student loans until after February 1, 2021.
- Economically Distressed: This only applies to student loan borrowers who are “economically distressed.”
Economically distressed, for example, refers to a student loan borrower who would otherwise pay $0 monthly through an income-driven repayment plan, was in student loan default or was 90 days delinquent on their student loans. It’s unclear whether House Democrats intended for student loan forgiveness only to apply to private student loans or whether federal student loans also were supposed to be included. However, in its current form, student loan forgiveness only would apply to private student loans. This is meaningful, since federal student loans comprise more than 90% of the $1.6 trillion dollars of outstanding student loan 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 relief for student loans. The Cares Act included student loan relief and President Donald Trump extended that student loan relief through December 31, 2020. That said, there’s no guarantee 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 starts and stops, Congress has not finalized a stimulus deal. While there is agreement in principle on stimulus checks and unemployment benefits, Congress has not agreed on the amount of funding for various initiatives, including unemployment benefits or state and local aid.
Moreover, there is no bipartisan support for student loan forgiveness in the next stimulus package. Both parties support pausing federal student loan payments, for example, for a temporary period. However, a payment pause is different than outright student loan forgiveness. If the Heroes Act in its current form becomes law, student loan forgiveness would only apply to a small subsection of the population. Given the requirement that you must be “economically distressed,” millions of borrowers would not fit within Congress’ definition. Therefore, don’t expect widespread student loan forgiveness in the next stimulus package, since Congress doesn’t appear prepared to cancel student loan debt.
Pay off student loans
If student loan forgiveness is not included in the next stimulus package, you still need a strategy for student loan repayment. Here are few options, all of which have no fees: