The ‘‘Coronavirus Aid, Relief, and Economic Security Act’’ or the ‘‘CARES Act’’ provided much-needed relief to some federal student loan borrowers in the face of the coronavirus crisis. The package, however, fell short in several critical consumer protection areas, including student loans. As we explained in a summary of the key student loan repayment provisions in the CARES Act, roughly 9 million federal student loan borrowers hold at least one Perkins Loan or commercially-held Federal Family Education Loans (FFEL), which have been left out the Act entirely. Additionally, private student loans are not covered by the provisions in the CARES Act.
As Congress negotiates additional emergency legislation to address fallout from the coronavirus crisis, it is critical that Congress both extend the CARES Act provisions to all student loan borrowers and broaden and expand those provisions to provide longer-term, more significant relief. Specifically, the next round of federal legislation should:
- Extend CARES Act relief to other federal loans, specifically commercially-held FFEL loans and Perkins Loans. There are as many as 9 million federal student loan borrowers who hold loans that were not covered by the CARES Act even though the loans have essentially the same terms and conditions as the loans that were covered. Consumers, advocates, and loan servicers agree that “it is imperative that Congress take swift action to ensure equitable treatment for all borrowers.”
- Extend CARES Act relief for a longer period of time, potentially until 2020 tax returns are due and income-driven repayment (IDR) payments can be appropriately calculated based on changed income levels.
- Ensure reimbursement of all tax refunds offset for TY2019. The Education Department stopped offsets and issued reimbursements for any borrowers who filed federal tax returns on or after March 13, 2020, but did nothing for those borrowers who happened to file their returns earlier in the year even though those borrowers are facing the same financial hardships as those who will receive tax refunds this year. All TY2019 offsets should be reimbursed so all borrowers can make ends meet during the emergency.
- Ensure that all offset reimbursements made are not subject to other collection efforts like bank account garnishment, attachment, or levy.
- Ensure that borrowers who lost work because of the COVID-19 pandemic stay on track for loan forgiveness.
- Provide relief to private student loan borrowers. Private student loan borrowers are hurting just as bad as federal student loan borrowers and need relief now.
- Cancel debt for all federal student loan borrowers in a manner that is broad and equitable for all and provide full and automatic for those borrowers whose loans place the most unfair and unaffordable burden on them. Full, automatic cancellation should be granted to (1) those whose schools or programs closed or discontinued before they could complete and who do not re-enroll in same or similar program within one year; (2) those who withdraw during the national emergency and don’t re-enroll within 18 months; and (3) those who attended schools like Corinthian and ITT that have already been found by the Department of Education to have illegally preyed on student borrowers, entitling students to loan relief.
- Implement other post-suspension relief such as auto-enrolling borrowers in IDR if they become delinquent after the suspension ends and providing a $0 payment level until their 2020 tax-year income tax information is available. This will ensure that payments calculations are based upon the most accurate income information.
With 22 million Americans and counting recently unemployed as a result of public health measures to stop the spread of the coronavirus, the current economic crisis is beyond anything that Congress or anybody else could have predicted. Federal student loan borrowers, especially those provided no protection in the CARES Act, are facing the consequences as they struggle to make ends now and worry what will happen when relief expires but jobs haven’t returned. Congress must act swiftly to extend what relief has already been provided to all borrowers and to provide additional relief so that borrowers can safely get through this crisis without immediately running into an insurmountable wall of debt when the economy begins to reopen.
Are you a student loan borrower impacted by the COVID-19 pandemic? Share your story and let us know what would help you during this time.