Alexander presented the plan to reporters this week as “an extension of the deferment of monthly student loan payments until students have an income.” But her plan does not extend relief from the CARES Act student loan itself. Alexander said his goal was “to change the system for repaying student loans so that you never have to pay more than 10 percent of your income, after deducting rent and food, from student loans.”
Under those existing payment options, and under Alexander’s plan, a borrower who has no income would not have to make a monthly payment, although interest on the debt would continue to accrue. “We will have a system with no income, no monthly payments,” said the Tennessee Republican.
But Democrats are already rejecting Alexander’s proposal. Senator Patty Murray, the top Democrat on the Senate education committee, called Alexander’s plan a “non-viable proposition” that “would reduce benefits for struggling borrowers in the midst of a pandemic and recession.”
“September 30 is just around the corner: any future COVID relief bill must extend a pause in payments for all borrowers as our country continues to weather this storm,” said Murray (D-Wash. ) It’s a statement.
An open question about the negotiations is whether the Trump administration would take executive action to extend relief to federal student loan borrowers. Current federal education law gives the secretary of education expanded powers to change the terms of federal student loans during a declared national emergency.
President Donald Trump in March quickly moved to use executive action to suspend interest on most federal student loans when the country began to close. Education Secretary Betsy DeVos also used her own powers to order a temporary halt to the collection of delinquent federal loans. Congress soon codified those benefits into the CARES Act and also went one step further by suspending most monthly student loan payments for approximately six months.
But it is unclear whether the Trump administration would revert to executive action to avoid the precipice of the student loan. The White House emphasized in a statement that focuses on pushing legislative action on the issue.
“President Trump has provided much-needed relief to students and families with student loan debts, both through executive action and legislation, and is committed to working with Congress to help those affected by this virus. with significant assistance, don’t rescue, “White House spokesman Judd Deere said in a statement to POLITICO.
An Education Department official said the agency had not yet made a decision on a possible extension of benefits. “The department is still evaluating its options and is focused on doing the following for students, borrowers, and taxpayers,” department spokeswoman Angela Morabito said in a statement.
Approximately 40 million borrowers are covered by the outstanding student loan relief. Consumer and student advocacy groups have been pushing Congress to extend and expand student loan relief, warning that loss of benefits could lead to increased delinquencies and defaults.
“We shouldn’t be talking about whether to extend, but how long to extend” benefits, said Whitney Barkley-Denney, a senior policy advisor working on student debt issues at the Responsible Loan Center.
“It seems that we are dealing in this fictional universe where Covid is getting better and not getting worse, and unemployment is getting better and not getting worse,” he said. “The idea that we are ready to go back to payments as always is puzzling to me.”
Pierce, the former Obama-era CFPB official who now directs policy at the Student Borrower Protection Center, said that while much of Congress has “legitimately focused on extending unemployment,” the expiration of relief The student loan also presents “a huge economic cliff.” “
If the benefits of the CARES Act are not extended, Pierce said, “Millions of student loan borrowers in the midst of the recession will fall behind, die, damage their credit, and face enormous economic consequences downstream.”
While less educated Americans are still much more likely to be unemployed, job loss increased from about 2 percent in March to 8 percent in April for workers who at least earned a bachelor’s degree. About 7 percent of graduates are still out of work, according to the latest monthly count by the Department of Labor.
Some Democrats are again seeking to include up to $ 10,000 of debt cancellation in the next stimulus. Senator Elizabeth Warren (Democrat of Massachusetts) has been pushing the plan, which alleged Democratic presidential candidate Joe Biden has also endorsed. Democrats are considering including the idea on their party platform.
House leaders cut their loan forgiveness provisions in their own stimulus bill this year, citing concerns about the cost, a last-minute review that angered progressives. Under the House-approved plan, only borrowers who are considered “financially distressed” would qualify for relief instead of all borrowers.
But full debt cancellation, as proposed by many Democrats, remains a difficult sale between Republican lawmakers and Democrats in the most conservative districts.
A House vote this month on an amendment that would cancel $ 10,000 per private student loan borrower provides a test case. Representative Madeleine Dean’s (D-Pa.) Proposal garnered just two Republican votes and 15 opposition votes from Democrats.
But expanding the pause in monthly student loan repayment and zero percent interest benefits enjoys much broader bipartisan support. The House of Representatives passed a separate amendment by Representative Alma Adams (DN.C.) that would extend that relief for private loan borrowers for another year in a voice vote. Both amendments were added to the House version of the annual defense policy bill and face an uncertain future as the house has to resolve its differences with the Senate.
Additionally, there is a growing bipartisan interest in extending the CARES Act student loan benefits to a subset of millions of federal borrowers who were not covered by the law. Up to 9 million borrowers who have government-backed loans held by private lenders or their universities were excluded from benefits.
In the House, Rep. Elise Stefanik (RN.Y.), a close ally of Trump, partnered with Democrats to sponsor two bills that would expand student loan benefits to all federal borrowers. In the Senate, Jack Reed (DR.I.) and Lisa Murkowski (R-Alaska) unveiled a similar plan this month to close the discrepancy between how different types of federal student loan borrowers are treated and extend benefits retroactively. .
“This legislation is a component of what a comprehensive student loan debt relief package should be,” Reed said on the Senate floor in introducing the plan. “As the crisis continues, we should extend repayment relief until sanitary and economic conditions improve enough for borrowers to begin repayment.”
