In light of the coronavirus and the havoc it is wrecking on the economy, Democrats are proposing legislation to cancel student loan payments during the pandemic emergency.
The emergency student loan payment and relief plan would provide relief to all federal student loan borrowers (not private student loans) by pausing monthly student loan payments for the entire duration of the coronavirus emergency.
The plan would involve having the U.S. Department of Education make the monthly payments, guaranteeing a minimum pay down of $10,000 for all federal student loan borrowers.
Federal student loan borrowers will still receive credit toward student loan forgiveness and loan rehabilitation for payments made on their behalf. All payments made by the U.S. Department of Education would be tax-free for borrowers.
The plan also stops all involuntary debt collections, wage garnishment, Social Security offsets and offset of income tax refunds for borrowers.
Once this program ends, there would be a grace period (90 days) where any missed payments do not result in fees, penalties or reports to the credit bureau.
Under this plan, borrowers who want to continue making payments, can have opt out of the program.
This emergency plan was proposed by Senate Democratic Leader Chuck Schumer (D-NY), Senate Committee on Health, Education, Labor, and Pensions Ranking Member Patty Murray (D-WA), Senate Committee on Banking, Housing, and Urban Development Ranking Member Sherrod Brown (D-OH), and Senator Elizabeth Warren (D-MA).
“Last time our economy crashed, this country made a devastating mistake: we turned our backs on students and families to bail out the giant banks,” said Senator Warren in a statement, who was adamant on forgiving a portion of student loan debt during her presidential campaign.
“The coronavirus outbreak brought with it crushing economic uncertainty, and students and borrowers need targeted, quick relief from payment burdens,” said Leader Schumer in a press release.
“During this pandemic, students and families should not have to worry that they will go into default on their student loans — they should be worried about keeping themselves and their loved ones safe. Student loan debt in this country is already crushing for many and without relief it will prevent people from fully participating in our economy,” said Senator Brown.
There are currently options to pause student loan payments or reduce your monthly payment for those impacted by coronavirus. Treasury Secretary Steven Mnuchin previously said the Trump administration is considering pausing student loan payments, but nothing has progressed on that yet. President Trump announced he would waive interest on federal student loans, which allows your full payment to go towards the principal balance.
With interest rates at an all-time low, now could be a good time to consider refinancing private student loans to save money. Consider the pros and cons of refinancing student loans before proceeding. Keep in mind refinancing federal student loans means a loss in many benefits, including income-driven repayment plans, any federal forgiveness programs, generous deferment options, and more.