Five Ways the Heroes Act is Impacting Student Loans

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By Kristen Kuchar

May 27, 2020

The Heroes Act, a $3 trillion stimulus package, could affect millions of student loan borrowers in several ways. From student loan forgiveness to extending the current payment pause, this is how it will impact your student loans if passed.

Student loan forgiveness for some borrowers

In the original proposal, student loan forgiveness would be available to all borrowers. However, in the version of the Heroes Act that passed the U.S. House of Representatives, only borrowers who are economically distressed would get $10,000 in student loan forgiveness.

To qualify for the student loan forgiveness, you must have had or been eligible for a $0 monthly loan payment under an income-driven repayment plan. Borrowers who were in default or in an economic hardship deferment on March 12, 2020 also qualify.

Borrowers whose income is less than 150% of the poverty line qualify for a zero monthly student loan payment under the income-driven repayment plans.

Use the income-driven repayment calculators for ICR, IBR, PAYE and REPAYE to determine whether you qualified for a zero monthly loan payment.

Relief for private student loan borrowers

While the payment pause comes as a relief to millions of federal borrowers, private student loan borrowers did not get that benefit. Despite many private lenders offering to pause payments, this was not a widespread option for all borrowers. The Heroes Act would not only provide a payment pause and interest waiver to private student loan borrowers, it would also provide up to $10,000 in loan forgiveness for private borrowers who qualify as economically distressed.

Longer pause on federal student loan payments

In March, most federal student loans were automatically placed in a forbearance. During this forbearance, no payment is due and interest will not accrue. Originally, this payment pause was scheduled to expire on September 30, 2020. If the Heroes Act becomes law, the payment pause and interest waiver will be extended until September 30, 2021. If you are working towards Public Service Loan Forgiveness, these months still count toward loan forgiveness.

More loans eligible for the payment pause

In addition to more time on the federal payment pause, more loans will be eligible. Commercially-held FFELP loans and Federal Perkins Loans will also be included in the payment pause and interest waiver. These loans were excluded from the original interest-free payment pause.

Revision to Public Service Loan Forgiveness

To qualify for Public Service Loan Forgiveness, borrowers must make 120 qualifying payments before the remaining balance will be forgiven. Previously, if a borrower consolidated their loans into a Federal Direct Consolidation Loan, this reset the loan forgiveness clock to zero. The Heroes Act will allow any qualifying payments made on component loans prior to consolidation to count towards loan forgiveness. This applies to Federal Direct Consolidation Loans made through September 30, 2021 or until 2 months after the job market begins to recover, whichever comes later.

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