The New Student Loans Stimulus Packages Means

The new student loans stimulus packages says this about student loans and student loan cancellation. The new, $1.9 trillion stimulus package that President Joe Biden proposed doesn’t include any student loan cancellation. The stimulus plan instead focuses on other policy priorities like $1,400 stimulus checks and $400 every week unemployment insurance. Senate Republicans have proposed a separate $618 billion stimulus package — a few third the dimensions of Biden’s stimulus plan — that also excludes student loan cancellation and offers $1,000 stimulus checks as a response to the Covid-19 pandemic.

Biden wants Congress to cancel student loans immediately. Biden also features a comprehensive plan for student loans. Under his proposal, student loan borrowers would get $10,000 of student loan forgiveness in response to the Covid-19 pandemic. The operative word during this statement is “Congress,” meaning that the branch , not the president through executive order, are going to be tasked with student loan cancellation. It’s still possible that Congress passes student loan cancellation within the stimulus package. However, there are several roadblocks. First, Republicans don’t support widescale student loan cancellation. Second, Biden’s stimulus proposal doesn’t include student loan forgiveness. Third, Congress dropped student loan cancellation from the last stimulus package. While Senate legislator Chuck Schumer (D-NY) says student loan cancellation may be a top priority, Schumer has focused on pushing a $50,000 student loan cancellation plan on Biden. for instance , Schumer tweeted at Biden — a fellow Democrat — to cancel student loans, albeit Biden said he’s unlikely to try to to so and needs Congress to act instead.

Student Loans and Recent Stimulus Packages: What You Need to Know
Nowadays, news about student loan-related issues is more challenging to understand than ever. With the 46th president’s election and continuing pandemic, there pops an update almost every day. Hence, it is not surprising that student loan borrowers feel lost due to information overload.

In accompanying the difficulties borrowers face, we created this guide to highlight the most critical points about the recent stimulus packages and debt collection suspension periods. Besides presenting, we will also explain what is in the stimulus package for student loans and what differences it brings.

Lastly, the borrowers who cannot access these benefits- the federal borrowers without direct loans and private debtors- will get familiar with their options to reduce debt obligations.

Different Stimulus Packages for Student Loans
In March, Congress approved the CARES Act, which allowed borrowers not to make payments for student loans until September end. During such forbearance periods, the borrowers make $0 payments with no interest accrued.

Later, in August, ex-president Donald Trump announced that the non-collection period would be prolonged till the end of December. In December, Education Department Secretary Betsy DeVos extended the forbearance period on student loans until January.

Different acts were also proposed throughout the period but did not get approval from Congress. For example, the Democratic House supported the HEROES Act. This act aimed to extend the forbearance period till September 2021. However, as it involved a considerable price- $3.4 trillion, Republicans did not support the idea.

Additionally, the Republican Senate supported the HEALS Act. This proposal targets cancellation of all federal repayment plans, except Revised Pay as You Earn and the Standard Repayment plan. Besides, different from the HEROES Act, the HEALS Act involved resuming the debt-collection period starting after September. Similarly, it was not approved, either.

March 2020 Stimulus Package
After the COVID-19 pandemic hit the economy, the government was obliged to make some favors for the borrowers. Otherwise, borrowers could default, which is not desired. Student loan default involves an expensive process, and debt collection becomes even more problematic. Therefore, not surprisingly, the Senate and House passed the CARES Act. We mentioned the act in the previous section, but it deserves more attention as it was worth $2.2 trillion.

The act brought the benefits almost automatically. The borrowers did not need to do much to receive government assistance. Its main element was the debt forbearance period till September end 2020. If a borrower made payments from March 13 till that period, he/she could request a refund. Besides, collection through wage garnishments or tax refunds stopped.

What about the Student Loan Forgiveness Program?
The CARES Act did not involve immediate forgiveness for student loans. However, it also did not negatively affect borrowers working for cancellation opportunities.

During this period, the borrowers are not required to repay the debt. Meanwhile, no interest accrued, and the months still counted for the federal aid programs.

For example, the Public Service Loan Forgiveness program requires 120 payments before the debtor receives the cancellation for the rest of the owed amount. Some borrowers were worried that $0 payments would stop their progress for the PSLF program, but it did not happen. The forbearance considered the PSLF payment progress. Income-Driven repayment plans also grant forgiveness after some payments. The CARES Act did not hurt the borrowers working for such debt elimination programs.

Employer Assistance
As a part of a stimulus package for student loans, employer contribution to student loan repayment was proposed. This contribution helped businesses to get a tax break-up worth a maximum of $5,250. However, it was only for some time, and the officials needed to approve it again in 2021 to make it permanent.

December 2020 Stimulus Package
In December, the government delivered an economic stimulus package. The package has many benefits for the student loan borrowers.

First, one element in the stimulus package for student loans was the employer’s ability to repay employees’ debt. The government extended this ability for five years. In general, employers can contribute to employees’ student loan payments, which involves a maximum of $5,250. Besides, this contribution is not taxable.

The government also made changes in the Pell Grant process. Its limit was increased, and the program started to cover incarcerated people. It was announced that more than $1 billion would be distributed as forgiveness to Historically Black Colleges and Universities. Besides the monetary benefits, the government also announced that it would make the FAFSA- Free Application for Federal Student Aid- process simpler. In this way, more borrowers will be eligible for the benefit.

However, unfortunately, the part of the stimulus package for student loans did not involve any change to Income-driven programs, removal of taxation on forgiveness, or extension of the non-collection period for borrowers. We will talk about these issues in the following sections.

Employer’s Contribution to Student Loan Repayment

One of the biggest changes included in the stimulus package for student loans was the extension of the employer’s contribution to the repayment process. The supporters of this change always wanted to make the assistance tax-free so that the young people have more incentives to work with certain companies. It was expected that the benefit would be extended for a year.

However, surprisingly, Congress made this benefit accessible for five more years. In this way, it communicated the idea that the employer’s assistance in repayment can be permanent.

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