Will your student loans be paused through September 2021?
Here’s what you need to know.
In a new letter, 77 advocacy groups urge U.S. Secretary of Education Betsy DeVos to continue to pause federal student loan payments through September 2021. In March, Congress pass the Cares Act, which temporarily suspended payments on federal student loans through September 30, 2020. President Donald Trump extended the moratorium on federal student loan payments through December 31, 2020. Federal student loan payments are scheduled to resume on January 1, 2021.
The advocacy groups, which include the NAACP, American Federation of Teachers and the National Education Association, want DeVos to support a proposal from House Democrats that would provide nine more months of temporary student loan relief. The Heroes Act—the $3 trillion stimulus package House Democrats passed—included a provision to extend the pause on federal student loan payments through September 30, 2021.
The signatories say that continuing economic stress from the Covid-19 pandemic make it burdensome for borrowers to pay student loans in January. Most federal student loan borrowers with Direct Loans have had their student loan payments paused since March. (FFELP or Perkins Loans did not qualify for the payment pause). The signatories ask DeVos to decide by November 15, 2020 if the payment pause will be extended beyond December 31 so that borrowers can plan for the holidays.
According to the letter: “Current economic projections, coupled with the spike in the average number of new coronavirus cases per day, indicate our nation will remain in a state of emergency for many months ahead…At the very least, by extending the repayment pause, your action can support millions of borrowers—particularly borrowers of color, who are disproportionately impacted by the current crises, and others experiencing significant financial distress—who need the financial support this repayment pause brings to their household budgets.”
Cancel Student Loans
The signatories want DeVos to cancel student loans. According to the letter, “You have the authority under the Higher Education Act to meaningfully solve the student debt problem by canceling federal student loan debt.” This position, which Sen. Elizabeth Warren (D-MA) also has proposed, is not universally accepted. Others argue that only Congress has the authority to cancel student loans through legislation. There have been multiple proposals to cancel student loans:
- Bernie Sanders: Cancel all private student loans and federal student loans
- Elizabeth Warren: Cancel student loans for 95% of Americans
- House Democrats: Cancel $30,000 of student loans
- Senate Democrats: Cancel $10,000 of student loans
- Joe Biden: Cancel $10,000 of student loans due to Coronavirus
- Elizabeth Warren: Grant authority to President Trump to cancel $50,000 of student loans
To date, Congress has not passed any of this legislation.
Student Loans: Issues
In their quest to extend the moratorium on student loan repayment, the signatories also cite several issues, among others, related to student loans:
- Wage Garnishment: 54,000 borrowers improperly had their wages garnished.
- Tax Returns Seized: Tens of thousands had their income tax returns seized improperly and this could occur again in 2021.
- Credit Scores: 5 million student loan borrowers improperly had their credit scores impacted when payments were supposed to be paused.
- Student Loan Default: Student loan default was already high pre-pandemic.
What opponents of the payment pause say
Opponents of extending the pause student loan payments cite the cost. A pause on payments effectively means that federal taxpayers pay the interest on federal student loans during this period. Borrowers have had nine months of no payments already and they argue that nine more months is excessive. They also argue that the payment pause is available to everyone, rather than targeting those who face economic hardship. As such, they believe many borrowers who benefit from the payment pause can afford their monthly payments and shouldn’t have access to pausing federal student loan payments. Finally, opponents argue that income-driven repayment plans can lower monthly payments to as low as $0 per month for borrowers who are struggling. Many borrowers who face financial hardship, according to opponents of the payment pause, already have access to student loan relief.
Pay off student loans
Don’t expect the pause on federal student loan payments to be extended. That’s why you need a game plan now to pay off student loans. Here are good places to start, all of which have no fees:
Student Loans: Reading
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