Second student loan incentive: five possible scenarios

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Millions of Student Loans Borrowers are eagerly awaiting news of whether there will be additional or extended student loan relief as part of a second major stimulus package.

congress passed the CARES law April in the wake of the rapid economic collapse caused by the Covid-19 pandemic. Although the implementation of the CARES law chaotic, provided for by the CARES Act significant relief for student loan borrowers. The stimulus package has suspended payments, interest and collections for all government-held states Student Loans.

But this student loan relief ends on September 30th. This month, the Department of Education will begin sending notices to millions of borrowers letting them know they will have to resume payments soon – even if many Americans remain in financially precarious positions.

House and Senate leaders of Congress and White House officials have been engaged in discussions of a possible new stimulus package. But the parties remain wide apart, and it’s unclear what relief might come next.

Student loan borrowers can expect any of these five possible scenarios to become a reality within the next two months.

Scenario 1: Congress passes the HEROES Act

The Democrats in the house have them HEROES Act in May, which would extend the suspension of student loans and interest payments under the CARES Act for an additional 12 months. The HEROES Act would also extend the protection of the CARES Act to include commercially issued federal student loan FFEL programs as well as federal Perkins loans. The bill would also pay $ 10,000 federal and state funds private student loan Forgiveness for Borrowers in Economic Need. The Democrats in the House of Representatives recently got a separate bill this would also suspend private student loan payments for 12 months.

However, for the HEROES Act to become law, it would also have to be passed by the Senate and signed by the President. The Senate Republican leaders rejected the HEROES Act without even allowing a vote on it.

Probability of occurrence: Very low.

Scenario 2: Congress passes HEALS law

The Senate has presented its own stimulus proposal, which differs from the HEROES Act. The Senate’s GOP proposal, called the HEALS Act, includes the following: proposal Simplify the federal student loan repayment system. The plan would include an earnings-based repayment option that would allow no-income student loan borrowers to have no monthly payment obligations while other borrowers would have to pay 10% of their disposable income for their student loans.

However, this proposal is practically identical to existing income-based repayment plans. The HEALS Act does not extend the relief for student loans provided for by the CARES Act and does not contain any waiver of student loans. That is why the Democratic leaders in the House of Representatives are rejecting the law, saying it does not go far enough. The Democrats in the House of Representatives would have to approve every bill passed by the Senate. However, there is evidence that even Republican senators do not fully support the HEALS Act.

Probability of occurrence: Very low.

Scenario 3: Compromises by Congress

While the House Democrats and Senate Republicans are far apart on the business cycle talks, negotiations continue and there is a very good chance that they will have a common ground for one in time for the September 30th protection of the CARES bill expires Find a compromise. While Republicans have shown little interest in major student loan waivers, some Republicans in Congress have signaled their willingness to extend the student loan relief under the CARES Act.

A GOP Congressman introduced legislation to extend the suspension of payments and interest until the end of 2020. While this three-month extension is much shorter than the 12-month proposed by House Democrats and would not include student loan waivers, it would add extra benefit to student loan borrowers for months of suspended payments and interest, while any further relief after the elections will be effectively imposed for the next Congress.

Probability of occurrence: possible.

Scenario Four: Actions by President Trump’s Executive

President Trump said on a recent Press briefing that its administration may consider extending the current moratorium on federal student loan payments. “We … have suspended student loan payments for six months and we are trying to do so in addition and for additional periods,” he said. Trump did not provide any further information.

With his re-election at stake, President Trump is likely aware of the political ramifications that would arise if millions of student loan borrowers received bills and requests for payment just days before the November election. President Trump granted student loan relief in March prior to the passing of the CARES bill by executive order than his administration staged a temporary emergency freeze and a suspension of payments on government-held federal student loans. Congress then codified and expanded these student loan facilities into law when it passed the CARES Act.

It is possible that if Congress can’t reach a compromise, the Trump administration could act unilaterally and issue a new executive order extending the existing student loan suspension and interest freeze. This would likely be a limited extension to get the government through the November elections.

Probability of occurrence: possible.

Scenario 5: No further relief for student loans

Unless Congress reaches a compromise on extending student loan facilitation and President Trump does not act through an executive order, then the provisions of the CARES Student Loan Facilitation Act will end on September 30, 2020. Settlement will resume and borrowers should with Your next billing date is in late October or early November. Interest will accrue again. Collection activities for failed federal student loans that were previously suspended – such as garnishment of wages and the confiscation of federal tax refunds – will also be resumed.

Many student loan borrowers will be outraged or unable to vote in the November elections in October and November. The legislature therefore has a strong incentive to find a compromise. However, if it does not, borrowers may have no choice but to resume normal repayment regardless of the economic circumstances. Here’s what to do if Congress doesn’t extend the student loan facility.

Probability of occurrence: lower, but possible.

further reading

Trump: “We are considering” an extension of the student loan payment suspension

GOP will include checks for $ 1,200 but no new student loan relief in the Stimulus Act

Democrats: Freeze all student loan payments and interest for 12 months

Over 100 civil rights groups tell Congress: Student debt relief in the next stimulus law

Rep. Ayanna Pressley: Cancel student loan now

GOP concerns about costs could limit student loan relief in the next pulse


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