3 options for student loan relief

Will Congress Extend Your Student Loan Benefits?

Here is what you need to know.

Student loans

Unless Congress takes action, your federal student loan payments will resume on October 1, 2020. That’s right. Congress passed the Cares Act – the $ 2.2 trillion financial stimulus package – which provided multiple benefits for your student loans, including:

  1. Congress suspended all payments for federal student loans until September 30, 2020.
  2. Congress too set interest rates at 0%, therefore, interest will not accrue on your federal student loans during this period.
  3. Congress halted collection of federal student loan debt during this period.
  4. Congress authorized non-payment of federal student loan debt during this period to “count” into the 120 monthly payments required for public service loan discount.

However, the Cares Law did not include all student loan forgiveness. Congress returns from recess on July 20, and Senate Republicans will present the next stimulus bill to Democrats. There are several questions to consider, including second dunning check, a lower social charges, a return to work bonus, a $ 4,000 in travel credit, a infrastructure plan, and other initiatives to create more manufacturing jobs. The big question for student loan borrowers, however, is whether Congress will extend student loan relief. Here are 3 possible options:

Option 1: The law on care is not extended

Congress was unable to extend student loan benefits in the Cares Act. This would not be surprising, as the student loan benefits will expire on September 30. This means that as of October 1,

  • You would start paying federal student loan payments (on your regular payment date)
  • Your interest rate would no longer be 0% and return to your normal interest rate.
  • Interest would start to run again.
  • Federal student loan debt collection, including wage garnishment, tax refunds, and Social Security payments, may resume.

Why wouldn’t Congress extend student loan relief? Money. The federal government loses money when it cannot collect student loan payments, including interest. The unprecedented six-month forbearance of student loans has helped millions of Americans. However, Congress has also spent billions of dollars in economic relief through multiple financial stimuli. Senate Republicans may not want to spend more money on student loan relief.

Option 2: The law on care is extended until October 31, 2020

Congress could extend student loan benefits in the Cares Act, but not as long as you think. For example, Congress could extend student loan relief by one month, until October 31, 2020. Why? November 3 is election day. The president, all members of the House of Representatives, and about one-third of U.S. senators are candidates for election. They might view a month-long extension as building at least some goodwill with voters. Of course, many student loan borrowers can see little difference between no extension and a one month extension, and it could backfire.

Option 3: The Cares law is extended until December 31, 2020

Congress could extend student loan benefits until December 31, 2020. More than 40 million Americans have applied unemployment. Daily cases of coronavirus have reached new records. States like California have started to reopen, to shut down parts of their economy. It is we do not know if the schools will reopen this fall or whether Americans will return to an office this calendar year. An extension until the end of the year would be a natural deadline. However, any decision to extend student loan relief (whether for a month or three months) would be based on several factors, including the pace of the economic recovery by this fall, other stimulus spending such that one second dunning check, and the level of bipartite support. The President and some Senate Republicans can argue that the economy is improving, jobs have improved, and people need to get back to work. As such, it is no longer necessary to extend student loan benefits.

Final thoughts

Congress may or may not extend student loan benefits. Congress will likely finalize the next stimulus plan by August 7, during the Congress break for its summer vacation. The Heroes Act, which the House of Representatives passed, includes a provision to extend student loan relief in the Cares Act for one year. Don’t expect this scenario, and don’t expect a student loan discount in the next stimulus bill. Whatever Congress does, act now to put a game plan in place.

How to repay student loans

Will Congress Extend Student Loan Relief? Be prepared for one of these 3 scenarios, or an alternate scenario. Here’s the important part: No matter what Congress does, be prepared. Make sure you have a game plan for paying off student loans. Start with these four options, all free:

Resources: Student loans

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