Student Loan Relief Ignored in New Stimulus Bill: Don’t Panic Yet

Michael Lux Analysis, Student Loan Blog 0 Comments

Today Congress will be passing a new Covid-19 related stimulus bill. Unfortunately, the relief doesn’t include an extension of the 0% interest and payment freeze on federal student loans.

Earlier versions of the bi-partisan legislation included an extension on the federal student loan payment and interest suspension currently set to expire on January 31st, 2021.

Fortunately, the news isn’t as bad as it might first appear for student loan borrowers.

The interest rate freeze is still likely to be extended.

The bad news: Politico and other outlets are now reporting that the new stimulus bill will not include an extension on student loan relief.

The good news: Congressional help isn’t necessary.

Congress did include student loan relief in the first stimulus bill. However, that particular relief has already expired. In August and earlier this month, President Trump signed executive orders extended the break for student loan borrowers.

Trump’s most recent extension expires on January 31st, 2021. He could extend it further before leaving office, or Joe Biden could sign an executive order once he takes office on January 20th, 2021.

Between the popularity of the student loan relief and the ability to extend via executive order, borrowers are likely to see the 0% interest and payment forbearance on their student loans continue.

Why would Congress not do anything about student loan payments in the stimulus bill?

If Congress can extend a popular relief program as part of a relief package, why would they not include it?

While we may never know for sure, one reporter had some excellent insight on the situation:

Essentially, even though both parties might support the relief, it does come with a cost to the government. That cost would drive up the total cost of the stimulus bill.

By letting the President handle the interest freeze, Congress can keep the total cost of the stimulus bill at $900 billion. While this number is quite large, being under a trillion may have been a significant sticking point in the negotiations.

Instead, Congress keeps the price of the package lower, and the President can extend the payment suspension on his own.

What does this mean for Student Loan Forgiveness?

Months ago, when the Democrats proposed their version of a second stimulus bill, they included $10,000 worth of student loan forgiveness for all federal borrowers.

Sadly, this was one of many provisions that stood little chance of getting through the Republican-controlled Senate.

An executive action is likely the best hope for borrowers looking for student loan forgiveness. However, while there is little debate about the President’s authority to suspend payments or freeze interest, there are questions about whether or not the President can forgive debt for all borrowers.

As a result, student loan forgiveness is a possibility for borrowers in the coming year, but it is unlikely.

How should borrowers plan ahead?

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