Late last week, the House passed an amended version of the HEROES Act, which included a number of critical protections that student loan borrowers need now. Importantly, the amended bill extends the current payment suspension, stops interest from accruing on federal loans through September 2021, and extends CARES Act relief to the 9 million borrowers who have commercially-held FFEL and Perkins loans.
This bill was introduced by Congresswoman Nita Lowey with the support of Speaker Nancy Pelosi and Congressman Bobby Scott, chair of the House Education and Labor Committee. This legislation would prevent federal student loan borrowers from having to worry about covering their student loans while navigating the uncertainty the pandemic has created.
If it passes the Senate and is signed into law, this bill will avert an imminent disaster created by a Presidential memorandum that extended the CARES Act relief only to December 31, 2020. The memorandum creates a repayment cliff that will restart federal loan repayment on January 1 and put defaulted borrowers at risk of having the Department seize their tax refunds (including the Earned Income Tax Credits and Child Tax Credits). Unless Congress acts now, the presidential memorandum could create a confusing situation for borrowers, as they are set to receive notice that repayment is going to begin 60 days before it restarts. If Congress waits, borrowers will begin getting notices that they will need to start repaying their federal student loans again the first week of November. Given that we will likely still be wrestling with the consequences of COVID-19 into 2021, reentering repayment in the new year could spell disaster for millions of borrowers.
Although the bill that the House passed did not include any provisions for cancellation of student debt, it follows on the heels of a resolution Senators Warren and Schumer introduced in the Senate two weeks ago declaring that this action could be taken administratively and calling for the President to cancel $50,000 of all federal student loan borrowers’ debt.
Student loan debt disproportionately burdens Black and Brown Americans and exacerbates the racial wealth gap. Abusive debt collection practices take funds like the Earned Income Tax Credit from borrowers’ safety nets and garnish borrowers’ wages, making it even harder for the borrowers who need every penny to put food on their families’ tables and contribute to their local economies. Moreover, thousands of borrowers who have been defrauded by predatory schools like ITT Tech, Corinthian Colleges, and others are still waiting on the U.S. Department of Education to deliver debt relief. Student debt cancellation is essential to keep American families financially afloat as they struggle to manage the global economic and public health crisis caused by COVID-19. Given how this action could improve millions of Americans’ participation in the economy, the President and Congress must act now.
In addition to these critical relief measures, Congress must continue working towards the long term relief borrowers will need after this crisis is over. Borrowers will need additional ways to get out of default, legislative changes so that loan collection doesn’t endanger borrowers’ economic safety nets, automatic and expanded closed school loan discharges, and relief from the debt created by predatory schools.
We want to hear from borrowers about their experiences managing their student loan debt during the pandemic. What is most concerning to you? What has your experience managing your debt been like during the pandemic? Have you been confused about the relief Congress has provided student loan borrowers? Share your story here.