Will the Cares Act student loan relief be extended?
As of March 13, 2020, the Cares Act — the $2.2 trillion financial stimulus — provided several benefits for your student loans, including:
- Congress paused all payments for federal student loans through September 30, 2020.
- Congress also set interest rates at 0%, so interest will not accrue on your federal student loans during this period.
- Congress halted collection of federal student loan debt during this period.
- Congress allowed non-payment of federal student loan debt during this period to “count” toward the 120 required monthly payments for public service loan forgiveness.
However, the Cares Act did not include any student loan forgiveness. Will Congress extend these student loan benefits? There are three options for student loan relief that Congress may consider:
- Don’t extend student loan debt relief.
- Extend student loan debt relief through October 31, 2020.
- Extend student loan debt relief through December 31, 2020.
If Congress extends these student loan benefits, it’s unlikely that they will be extended through 2021.
Student loan refinancing rates are at historic lows
Student loan refinancing rates have dropped to historic lows and start as low as 1.99%. Student loan refinancing is the process of combining your federal student loans, private student loans or both into a new, single student loan with a lower interest rate. The goal of student loan refinancing is to save money and pay off student loans faster. You can choose a variable or fixed interest rate, and you can also choose a loan term between 5 and 20 years to pay off your student loans.
This student loan refinancing calculator shows you how much you can save when you refinance student loans.
Student loan interest rates are at historic lows
It’s also much cheaper to borrow new student loans for college or graduate school. Rates for new student loans have dropped to an all-time low. New federal student loans for undergraduate students are 2.75% and new rates for graduate students are 4.30%. Private student loans may have even lower interest rates.
Joe Biden: Cancel student loan debt
Former Vice President Joe Biden released a comprehensive student loan plan, which includes student loan forgiveness and tuition-free college. In the wake of the Covid-19 pandemic, Biden proposed a Covid-19 student loan forgiveness plan to cancel up to $10,000 in student loan debt for each borrower. Biden would forgive all undergraduate tuition from two- and four-year public colleges and universities. Biden also would forgive all undergraduate tuition for borrowers who earn $125,000 or less per year and who graduate from a private Historically Black Colleges and Universities (HBCU’s) and Minority-Serving Institutions (MSI’s). Through public service loan forgiveness, Biden also would forgive $10,000 a year in student loan debt for up to 5 years for a total of $50,000 of student loan forgiveness.
Will I get student loan forgiveness?
“Will I get student loan forgiveness?” is a popular question on the minds of many student loan borrowers. While Biden’s plans could become law, it’s important to focus on current proposals in Congress. There are several proposals in Congress to cancel student loan debt.
- Senate Democrats: Senate Democrats have proposed to cancel $10,000 of student loan debt.
- House Democrats: House Democrats, led by Rep. Ilhan Omar (D-MN) and Rep. Ayanna Pressley (D-MA) proposed to cancel $30,000 of student loan debt.
- Heroes Act: The Heroes Act initially proposed $10,000 of student loan forgiveness for your federal student loans and $10,000 of private student loan forgiveness. However, House Democrats passed the Heroes Act with a weaker provision that would cancel $10,000 of student loan debt only for borrowers who are struggling financially (rather than every student loan borrower).
Student Debt Crisis, a leading non-profit focused on student loan debt, delivered a petition with 1.2 million signatures to former presidential candidate Sen. Elizabeth Warren (D-MA) — a leading proponent of student loan forgiveness — to cancel student loan debt in the wake of the Covid-19 pandemic.
Will the new stimulus package include student loan relief?
Given all these proposals, will the new stimulus package include student loan forgiveness? Senate Majority Leader Mitch McConnell is expected to introduce a new stimulus package this week. Based on this key timeline for the new stimulus package, Congress could finalize the new stimulus package before August 7. Don’t expect student loan forgiveness in the new stimulus package, however. Why? Senate Republicans, who control the Senate with 53 seats, don’t support a plan to cancel to student loan debt. That doesn’t mean you won’t ever get student loan forgiveness—just don’t expect it now. There are still other ways that you can get student loan forgiveness. For example, you can receive student loan forgiveness through income-driven repayment plans as well as public service loan forgiveness. A new game changer for student loan forgiveness also makes it easier for those seeking public service loan forgiveness. Senate Republicans, who want to limit federal spending, also are focused on other economic priorities besides student loan forgiveness such as second stimulus checks.
Proposal: Cancel student loans in bankruptcy
Rep. Mary Gay Scanlon (D -PA) introduced new legislation last week that would make it easier for you to discharge student loans in bankruptcy if you are struggling financially and have been impacted by Covid-19. The COVID-19 Student 5 Loan Relief Act of 2020 would apply to both private student loans and federal student loans, and be available to all Americans impacted by Covid-19. That said, depending on your income level, you would have to show a loss of income anywhere from 20% – 40% to qualify under this student loan proposal.
How to pay off student loans
As Congress considers legislative proposals to cancel student loan debt, make sure you have a game plan to pay off student loans. Start with these four options, all of which have no fees:
- Student loan refinancing
- Student loan consolidation
- Income-driven repayment plans
- Student loan forgiveness